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Will Cisco Systems' (CSCO) Q3 Earnings Surprise Estimates? - Analyst Blog

Cisco SystemsCSCO is set to report third-quarter fiscal 2015 results on May 13. Last quarter, the company posted an 11.1% positive earnings surprise. Let's see how things are shaping up for this announcement.

Factors to Consider

Cisco's second-quarter earnings of 50 cents surpassed the Zacks Consensus Estimate by 5 cents. Revenues decreased 2% sequentially but increased 7% year over year to $11.9 billion. Also, revenues beat the Zacks Consensus Estimate of $11.77 billion.

However, the second quarter was weak for Cisco in terms of margin growth, especially due to unfavorable product mix.

Despite growing competition from several smaller players, Cisco appears to be strong in its domain. Improving markets for the company's products in the United States and Europe, strong renewals, large multi-year service wins and solid growth prospects in areas like cloud computing, consulting, managed services and security should boost earnings in the to-be-reported quarter.

For the third quarter, Cisco expects revenues to increase in the range of 3% to 5% on a year-over-year basis. The company expects non-GAAP gross margin within 61-62% and non-GAAP tax rate of 22% yielding non-GAAP earnings per share of 51 to 53 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 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 48 cents. Hence, the difference is 0.00%.

Zacks Rank: Ciscohas a Zacks Rank #3 (Hold) which, when combined with a 0.00% ESP, makes surprise prediction difficult.

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

Stocks to Consider

You could consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:

LG Display Co., Ltd. LPL , with an Earnings ESP of +64.29% and a Zacks Rank #1 (Strong Buy).

Teekay Tankers Ltd. TNK , with an Earnings ESP of +43.33% and a Zacks Rank #1.

Urban Outfitters Inc. URBN , with an Earnings ESP of +3.33% and a Zacks Rank #1.

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CISCO SYSTEMS (CSCO): Free Stock Analysis Report

URBAN OUTFITTER (URBN): Free Stock Analysis Report

LG DISPLAY-ADR (LPL): Free Stock Analysis Report

TEEKAY TANKERS (TNK): 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 Nasdaq, Inc.


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

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