Q3 Preview: Cisco (CSCO) May Meet and Beat Expectations on Conservative Views

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Cisco Systems (Nasdaq: CSCO) shares are outperforming the broader stock market heading into its third-quarter earnings report, expected out after the market close Wednesday.

The Street is currently modeling for EPS of 47 cents and revs of $11.58 billion. This compares with EPS of 47 cents and revs of $11.5 billion last quarter and EPS of 42 cents with revs of $10.9 billion in the same period last year.

Shares of Cisco moved 17.4 percent higher through the quarter to $21.07 at the end of March. The move compares with a 15 percent drop ahead of the company's third-quarter results last year.

Data from Bloomberg has 27 analysts with a Buy rating on Cisco, 20 at Hold, and two at Sell. The Street's price target average is $23, which ranges from $18 to $27. Over the last 52 weeks, Cisco has moved between $13.30 to $21.30.

Analyst Comments

  • Deutsche Bank sees EPS of 46 cents and revs of $11.60 billion. The firm is looking for an improvement in "backlog for Cisco's 10GE Nexus switches, UCS servers, and security gear; the key catalyst being Romley and Cloud upgrades. Campus switching could see a BYOD-driven ramp from midyear+. In routing, we see a volume ramp for the ASR 9k from June onwards, and improving trends in enterprise and carrier video, and in mobile packet core. Public sector could see some improvement heading into October, while near term trends in some developing markets and in parts of EMEA seem soft."

  • Wells Fargo is looking for EPS of 46 cents on sales of $11.58 billion. The firm stated, "While supply chain and peer results suggest cautious enterprise and carrier spending during the first few months of 2012, we believe Cisco's guidance accounted for challenges in Europe, weak carrier activity, and soft public sector demand. In addition, industry contacts consistently noted strength in the Cisco channel, with many large partners suggesting their Cisco business was tracking in line to ahead of plan. Improved execution and share gains were frequently cited as driving strength in the qtr."

    In addition, Wells Fargo sees potential upside from better sales and strong expense discipline.

  • JPMorgan sees EPS of 46 cents and revs of $11.52 billion. The firm sees Cisco benefiting from weak carrier spend and cautious Street guidance. In addition, JPMorgan sees Cisco gaining "from a carrier spending pick up in H2'12 and we anticipate a strong UCS and switching ramp towards the end of 2012 and through 2013."

    On the potential Romley pause, the firm stated, "Given Intel's strong Xeon E5-2600 launch, we see potential UCS and switching pauses as enterprises qualify the new chips. However, we anticipate a demand recovery at the end of 2012."

  • Wedbush is looking for EPS of 47 cents and revs of $11.60 billion. Wedbush alluded to decreasing inventories on sub 10Gb products in anticipation of cycle refresh.

    The firm is anticipating some GM erosion: "We note that discounting this quarter was incrementally higher than previous quarters at Cisco and among players in the industry. Furthermore, our checks indicate a greater level of competitive discounting. We have also seen several competitors overhaul their channel and distribution programs over the last quarter, which we generally interpret as increased discounting in the form of incentives."
Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out Cisco's past performance at Streetinsider's Cisco's Income Statement .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: CSCO

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