Q3 Preview: Slumping Cisco (CSCO) May Have One More Trick as 4G, Mobile Video Set to Expand
Cisco (Nasdaq: CSCO) is trading lower Wednesday ahead of the
company's third-quarter earnings release, slated for after the
market close. Shares are down 0.3 percent to $17.74 at last check.
Cisco is expected to report EPS of $0.37 on revs of $10.86 billion. Last quarter, the San Jose, CA-based tech giant reported EPS of $0.37 on revs of $10.4 billion. Looking back at the third quarter of last year, Cisco produced EPS of $0.42, ex-items, on revs of $10.4 billion.
Shares fell about 18 percent through the quarter and are up 1.8 percent since.
Cisco stock is trading at a P/E of 10.2x FY12 EPS estimates, compared with 20.3x at Juniper Networks, Inc. (Nasdaq: JNPR) and 12.9x for Alcatel-Lucent ( ALU ).
Data from Bloomberg has 24 analysts with a Buy on Cisco, 21 with a Hold, and two suggesting to Sell. The analyst price target average is $23, with a high of $29 and low of $17.50. Shares have traded in a range of $26.8 - $16.52 over the last 52-weeks.
- Goldman Sachs sees EPS of $0.36 and revs of $10.817 billion.
Goldman is expecting in-line results, but guidance at the low end
of analyst expectations. "Our relatively cautious view is driven
by weaker than expected revenues for the enterprise switching
industry in CQ111, driven not only by the maturation of the
category and the deflationary impacts of cloud computing, but
also by difficult comps given the industry's 30% growth in CY10."
Goldman's last survey has respondents planning spending on Cisco
products at muted levels, below the 50 - 70 percent that was
expected. Further, Goldman is looking for gross margins to
decline more moderately than expected from the market, coming in
at 62 percent.
- Wells Fargo is looking for EPS of $0.38 and sales of $10.82
billion. Wells is modeling a gross margin of 62.5 percent and
operating margin of 24 percent. "with strong end-market exposure,
significant competitive advantage, and trough valuation we view
current levels asan attractive entry point for long-term
- Wedbush expects EPS of $0.37 and revs of $10.881 billion.
Checks have Wedbush believing results will be in-line. "We
believe demand in the quarter was lackluster, given weakness in
switching and routing solutions in EMEA (20% of sales), public
sector (22% of sales), and select sub segments within service
provider (32% of sales)."
In terms of building shareholder value moving forward, Wedbush comments: "we would like to see a wholesale exit from the consumer business given its lower margin profile and negative returns associated with driving brand awareness. With a new generation of the population who see wireline television as a legacy technology, chasing the price-sensitive SMB market needs to be re-evaluated. In addition, we think the company needs to resist the idea of looking at the TAM of stand-alone L4-7 products and reallocate resources to this segment as the new delivery model will require superior technology which Cisco arguably lacks. Furthermore, we believe the company may need to reallocate its mix of service provider customers to content providers and mobile operators and away from cable operators whose businesses are becoming less viable, in our view."
- Deutsche Bank sees EPS of $0.37 amd revs of $10.9 billion.
"Near-term, our checks indicate the company is benefiting from
better than normal seasonal spending patterns in major verticals
such as technology, financial services, automotive, retail and
the large telcos and Web 2.0 / Cloud providers...Revenue is
likely to be better than feared as well, driven by growth from
the routing, datacenter, and video/collaboration product cycle
ramps in Cisco's large enterprise and Tier-1 carrier customer
base, especially in the US and in the emerging markets."
- BGC sees EPS of $0.40 and revs of $10.9 billion.