Will Cisco Systems (CSCO) Miss Earnings Estimates? - Analyst Blog

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Cisco Systems ( CSCO ) is set to report second-quarter fiscal 2014 results on Feb 12. Last quarter, it posted a 2.1% positive surprise. Let's see how things are shaping up for this announcement.

Growth Factors this Past Quarter

The company's first-quarter earnings exceeded the Zacks Consensus Estimate by a penny. Revenues of $12.1 billion increased 1.8% year over year but were down 2.4% sequentially. Additionally, revenues increased year over year across most geographies, except Asia-Pacific Japan and China (collectively known as APJC) which declined 8.7% on a year-over-year basis.

The second quarter was strong for Cisco in terms of margin growth. This was mainly due to favorable product mix aided by lower variable expenses.

For the second quarter, Cisco expects revenues to decrease in the range of 8% to 10% on a year-over-year basis. The company expects non-GAAP gross margin within 61%-62%; non-GAAP tax rate of 21%, yielding non-GAAP earnings per share of 45 cents to 47 cents.

Earnings Whispers?

Our proven model does not conclusively show that Cisco Systems will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP:   Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 41 cents. Hence, the difference is 0.00%.

Zacks Rank #4 (Sell): We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

You could consider other stocks with a positive earnings ESP and a Zacks Rank #1, 2 or 3 such as:

Melco Crown Entertainment Limited ( MPEL ), with Earnings ESP of +7.50% and a Zacks Rank #1 (Strong Buy).

Ship Finance International Limited ( SFL ), with Earnings ESP of +52.63% and a Zacks Rank #1.

Salix Pharmaceuticals Ltd. ( SLXP ), with Earnings ESP of +18.75% and a Zacks Rank #1.



CISCO SYSTEMS (CSCO): Free Stock Analysis Report

MELCO CROWN ENT (MPEL): Free Stock Analysis Report

SHIP FIN INTL (SFL): Free Stock Analysis Report

SALIX PHARM-LTD (SLXP): Free Stock Analysis Report

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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 , Business , Earnings , Stocks

Referenced Stocks: CSCO , MPEL , SFL , SLXP

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