Lower compensation and SG&A may offset discounting in bundled product offerings as Cisco is seeking more and more of an enterprise’s total technology budget.  Our fear is long-term lower margin compression after years and years of being technology’s envy in gross margin.

Cisco is down ahead of earnings but still just above this $20.00 mark against a 52-week trading range of $13.30 to $22.15.  Analysts have a consensus target of $21.66, but we just saw one target on Tuesday morning from Credit Suisse at $26.00.

As far as expectations… Thomson Reuters has consensus estimates of $0.43 EPS and $11.23 billion in sales.  For the quarter we are already in, the estimates are $0.45 EPS and $11.46 billion in revenues.  For the July year-end, the estimates are $1.77 EPS and $45.83 billion in revenues.

Cisco trades at an implied 11.4-times current year earnings estimates, and maybe even a tad less if you factor in the wasted billions used for share buybacks.

Chart analysis is not worth much here today in all honesty.  Cisco is at a post-reorganization high and back over $20.00.  The 50-day moving average is $18.92 if there is another blow-up, but here are the shorter moving averages… 5-day at $20.08, 10-day at $19.88, and the 20-day is at $19.71.

Options traders appear to only be pricing in a move of up to $0.60 or even a tad less using the monthly options which expire in a week and a half. For whatever this is worth, options traders are much more heavily involved in at-month Call options over Put options with at least a 2.5:1 ratio if you combine weekly and monthly trading volumes.

Cisco has pledged to raise its quarterly dividend of $0.06 ‘in time.’  It has now had four consecutive payments of that rate of $0.06 per share per quarter and that yield comes to only about 1.2% for new investors.  Longer-term, that dividend needs to go over 2% if it wants to entice income-oriented investors.  It is possible that we will get a dividend hike.  If not this quarter, we expect one soon.

JON C. OGG

And speaking of turnarounds, this is the second full report after the restructuring efforts have taken effect for Cisco.  It is a leaner company and operating costs (at least compensation in SG&A) should be lower now.  The problem is that Cisco has been wanting to win back much business and to lock out other competitors as it goes after every penny spend of the network (now including datacenters too).  Translation: we just expect longer-term margin compression.

In this last leg of the rally, Cisco is back above $20.00 against a 52-week trading range of $13.30 to $22.15.  Thomson Reuters has consensus estimates of $0.43 EPS and $11.23 billion in sales.  For the quarter we are already in, the estimates are $0.45 EPS and $11.46 billion in revenues.  For the July year-end, the estimates are $1.77 EPS and $45.83 billion in revenues.  In short, Cisco trades at an implied 11.4-times current year earnings estimates.

Cisco unfortunately wastes more money than it should buying back stock and that price level on the buyback plan is probably still just slightly above breakeven.  Analysts have a consensus target of $21.66, but we just saw one target on Tuesday morning from Credit Suisse at $26.00.  Chart and options trading analysis will be made in much more detail on Wednesday ahead of the report.

One last note… Cisco has pledged to raise its quarterly dividend of $0.06 ‘in time.’  It has now had four payments of that rate of $0.06 per share per quarter and that yield comes to only about 1.2% for new investors.  Longer-term, that dividend needs to go over 2% if it wants to entice income-oriented investors.  It is possible that we will get a dividend hike.  If not this quarter, we expect one soon.

JON C. OGG

The Allstate Corporation (NYSE: ALL) Started as Outperform at William Blair.
AT&T Inc. (NYSE: T) Reinstated as Neutral with $30 price target at Credit Suisse.
Best Buy Co., Inc. (NYSE: BBY) Started as Outperform with $32 target at Credit Suisse.
Celgene Corporation (NASDAQ: CELG) Cut to Hold on Valuation at Argus.
Cliffs Natural Resources (NYSE: CLF) Cut to Neutral at Credit Suisse.
Equity One Inc. (NYSE: EQY) Cut to Sell at Citigroup.
Hartford Financial Services Group (NYSE: HIG) Cut to Neutral at JPMorgan.
J.C. Penney Company, Inc. (NYSE: JCP) Raised to Overweight at Piper Jaffray; Maintained as Buy but raised price target to $49 at Argus.
Juniper Networks Inc. (NYSE: JNPR) Cut to Market Perform at Morgan Keegan.
Kimco Realty Corporation (NYSE: KIM) Cut to Neutral at Citigroup.
The Progressive Corporation (NYSE: PGR) Started as Underperform at William Blair.
Sandridge Energy Inc. (NYSE: SD) Started as Buy at Citigroup.
Synaptics Inc. (NASDAQ: SYNA) Raised to Buy at Needham; Cut to Neutral at Stern Agee.
Under Armour, Inc. (NYSE: UA) Reiterated as Buy with $102 price target at Canaccord Genuity.
Vistaprint NV (NASDAQ: VPRT) Cut to Underperform as Bear of the Day at Zacks.
ZOLL Medical Corporation (NASDAQ: ZOLL) maintained Outperform as Bull of the Day at Zacks.

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Riverbed Technology, Inc. (NASDAQ: RVBD) is getting hit very hard, perhaps even too hard, after its 53% profit gains beat expectations and revenue met estimates more or less.  The problem is that the company’s guidance for the quarter ahead remains challenging.  Riverbed was up 1.2% at $29.92 today but now the stock is down almost 13% in the after-hours session to $26.00 per share in active trading.

So, as far as Juniper is concerned, its non-GAAP profit fell to $0.28 EPS from $0.35 a year earlier while revenue fell to $1.12 billion from $1.19 billion a year earlier.  Those were more or less in-line with estimates, but the company talked about the current quarter being a challenging one and it cut sales expectations to $960 to $990 million versus a target of about $1.1 billion.  That is just heading very much in the wrong direction no matter how you cut it.  Juniper closed down 1% today and the after-hours earnings reaction has shares down almost 8% at $20.60 in active after-hours trading.

There is an old saying that a tail cannot wag the dog.  Unfortunately that is not proving to be the case this evening.  Cisco Systems, Inc. (NASDAQ: CSCO) is the king of the networking space and its shares are down 1% at $19.62 in the after-hours after closing flat at $19.83.  Cisco is in a turnaround and it is believed by many that Cisco is trying to win back much of its lost business in a leaner operating structure.  We’ll know in the coming weeks if that is true or not.

Stay tuned.

JON C. OGG

American Express Co. (NYSE: AXP) Reiterated Buy with $60 target at Argus.
Atmel Corporation (NASDAQ: ATML) Maintained Buy but cut target to $11 at Canaccord Genuity.
BlackRock Inc. (NYSE: BLK) Started as Buy at UBS.
Chevron Corporation (NYSE: CVX) Maintained Outperform but cut earnings estimates at Credit Suisse.
Continental Resources (NYSE: CLR) Cut to Hold with $79 target at Canaccord Genuity.
Entertainment Properties Trust (NYSE: EPR) Cut to Neutral at JPMorgan.
Equity Residential (NYSE: EQR) Cut to Neutral at JPMorgan.
France Telecom SA (NYSE: FTE) Cut to Underweight at JPMorgan.
HSBC Holdings PLC (NYSE: HBC) Cut to Underperform at BofA/ML.
Juniper Networks Inc. (NYSE: JNPR) Cut to Hold at Argus.
Lennar Corporation (NYSE: LEN) Cut to Market Perform at KBW.
Lincoln Electric Holdings, Inc. (NASDAQ: LECO) named as Value stock of the day at Zacks.
MarkWest Energy Partners (NYSE: MWE) named as Bull of the Day at Zacks.
Microsoft Corporation (NASDAQ: MSFT) Maintained Outperform but cut target to $34 from $35 at Credit Suisse; Maintained Hold and lowered estimates at Argus.
Oasis Petroleum (NYSE: OAS) Cut to Hold with $32 target at Canaccord Genuity.
SUPERVALU Inc. (NYSE: SVU) Maintained Neutral but cut target to $7 from $10 at Credit Suisse.

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While Acme competes against Cisco Systems Inc. (NASDAQ: CSCO), shares of Riverbed Technology, Inc. (NASDAQ: RVBD) and Juniper Networks, Inc. (NASDAQ: JNPR) are the stocks suffering after posting gains in the first day of 2012.

Acme cut its targets to $1.03 to $1.05 EPS for the year on sales of $308 million to $310 million.  When it gave guidance in October, those ranges were $1.14 to $1.18 EPS on sales of $315 million to $320 million.

The stock was initially halted after a 2.9% gain to $31.81 today, but shares are down 17.5% in the after-hours session down around $26.25.  Sadly, this is going to make for a 52-week low as the range over the last year was $29.25 to $84.50.

JON C. OGG

Affymetrix Inc. (NASDAQ: AFFX) Raised to Neutral from Sell with a $4.50 price target at Goldman Sachs.
AMC Networks Inc. (NASDAQ: AMCX) Started as Overweight at J.P.Morgan.
Broadcom Corporation (NASDAQ: BRCM) Raised to Outperform at Wells Fargo.
Canadian Solar, Inc. (NASDAQ: CSIQ) named as Bear of the Day by Zacks Investment Research.
Cisco Systems, Inc. (NASDAQ: CSCO) Started as Buy at Nomura.
Deckers Outdoor Corporation (NASDAQ: DECK) Cut to Underperform from Buy at Stern Agee.
E-Commerce China Dangdang Inc. (NYSE: DANG) Started as Hold at Brean Murray.
Elan Corporation, plc (NYSE: ELN) Raised to Buy at Deutsche Bank.
Estee Lauder Companies (NASDAQ: EL) Raised to Outperform as Bull of the Day at Zacks.
First Solar, Inc. (NASDAQ: FSLR) Cut to Neutral from Buy at R.W. Baird.
Invesco Mortgage Capital Inc. (NYSE: IVR) Cut to Market Perform from Outperform at Keefe Bruyette & Woods.
The Interpublic Group of Companies, Inc. (NYSE: IPG) Started as Overweight at Barclays.
Juniper Networks, Inc. (NYSE: JNPR) Started as Neutral at Nomura.
Omnicom Group Inc. (NYSE: OMC) Started as Equal Weight at Barclays.
OmniVision Technologies (NASDAQ: OVTI) lowered estimates again but maintained as Buy with $12.00 price target at Canaccord Genuity.
Onyx Pharmaceuticals, Inc. (NASDAQ: ONXX) Raised to the Conviction Buy List with a $47.00 price target objective at Goldman Sachs.
PetroChina Co. Ltd. (NYSE: PTR) Raised to Buy from Neutral at Citigroup.
Renren Inc. (NYSE: RENN) Started as Hold at Brean Murray.
Riverbed Technology, Inc. (NASDAQ: RVBD) Started as Neutral at Nomura.
Siemens AG (NYSE: SI) Cut to Neutral from Buy at Goldman Sachs.
Youku.com Inc (NYSE: YOKU) Started as Hold at Brean Murray.

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First and foremost, here is a quick hit on its competitors and peers with overlaps. Juniper Networks, Inc. (NYSE: JNPR) is likely to move in the same direction as Cisco after earnings, but its shares remain battered from highs as well.  Alcatel-Lucent SA (NYSE: ALU) has been battered endlessly with downgrade after downgrade and its magic turnaround failed yet again to come to meaningful fruition.  Riverbed Technology, Inc. (NASDAQ: RVBD) recently recovered handily and some are hoping that this means good things for Cisco and Riverbed both.  Brocade Communications Systems, Inc. (NASDAQ: BRCD) remains as “the poor man’s Cisco” and was often a buyout target, but that time seems to have come and gone.

As far as what analysts are calling for out of Cisco, Thomson Reuters has a consensus of $0.39 EPS and $11.02 billion in revenues.  Next quarter estimates are $0.42 EPS and $11.13 billion in sales.  If Cisco reaches way out and offers 2012 guidance (July fiscal year-end) those consensus estimates are $1.70 EPS and $45.26 billion in sales.

Cisco shares are down over 2% today with the weak stock market, but at $17.89 its 52-week range is $13.30 to $24.60.  Our take is that Cisco was beaten down too much for its leadership position and because of its low valuation and high cash balances.  At the same time, shares have rallied close to 45% from the extreme lows seen in August during the market sell-off.

We would note that the chart is in a very interesting place that should offer some significant support even if the news is bogged down by woes in Europe.  The 50-day moving average is $16.74 and the 200-day moving average is now $16.78.  Those just crossed this week and the $17.89 price has been above that for most of the last month.  See the stockcharts.com chart below.

Options traders appear to be braced for a move of $0.75 or so in either direction.  Analysts have been far more positive on the way up compared to the pre-summer levels and the consensus price target is $19.37 from Thomson Reuters.

We know that the telecom and communications providers have been selectively telling suppliers and services providers that they have had order pushouts.  Still, we have seen some win and some lose.  Cisco is just too large to be immune to the current woes of Europe, slower spending in Asia and other slowing fears.  At the same time, Cisco was just punished far too harshly throughout 2011 before its shares recovered.

JON C. OGG

The SPDR S&P 500 (NYSE: SPY) rose by 10.9%. but the gain from trough to peak was far more.  We have offered some color on each and shown how much implied upside is there to the Thomson Reuters consensus analyst price target as well.  These gainers are listed lowest to highest on a percentage basis for the month.

Denbury Resources Inc. (NYSE: DNR) rose by 36.5% as shares rose from $11.50 to $15.70. Analysts have a consensus price target of $24.40. The company acquires and develops oil and gas properties in the Gulf Coast states.  The company announced a $500 million share buyback during October, but it also announced that its President & COO has left the company.

Valero Energy Corporation (NYSE: VLO) saw a 38.4% gain as the stock rose from $17.78 at the end of September to $24.60 at the end of October.  Analysts have a consensus price target of $31.50.  Valero was the subject of buyout speculation and its shares have not really sold off after word came that one rumored acquirer was not looking o acquire it.

National Oilwell Varco Inc. (NYSE: NOV) saw a 39.3% rise from $51.22 at the end of September to $71.33 at October’s end.  Analysts have a consensus price target of $89.75. If the offshore oil market is going to be opened back up, having a an offshore rig manufacturing business is going to be robust again.

Joy Global, Inc. (NASDAQ: JOYG) saw a gain of 39.8% from $62.38 on September 30 up to $87.20 at the end of October.  Analysts have a consensus price target of $102.00.

Juniper Networks, Inc. NYSE: JNPR) rose by 41.8% in October $24.47 versus $17.26.  The turnaround in networking is being seen in the stock. Analysts have a consensus price target of $25.03. Juniper has risen off of lows just as many other networking equipment players have seen.

Goodyear Tire & Rubber Co. (NYSE: GT) rolled on and on for a 42.3% gain as shares went from $10.09 at the end of September to $14.36 at the end of October.  Analysts have a consensus price target of $18.69.  Goodyear is back to profits and shares are actually still very cheap at about 7-times a blended forward P/E for 2011 and 2012 estimates.

El Paso Corp. (NYSE: EP) saw a 43.1% gain for the month but we would not that this is due mostly to the acquisition of the company.

F5 Networks, Inc. (NASDAQ: FFIV) had a very large run as the network equipment player bounced hard off its lows.  A move from $71.05 at the end of September to $103.95 was up 46.3%. Analysts have a consensus price target of $106.67.

Nabors Industries Ltd. (NYSE: NBR) was one of the top performers for October as the shares rose from $12.26 to $18.33, generating a 49.5% gain. The $100 million payout for the CEO exit is under criticism, but the oil and gas driller did beat earnings and has reorganized its management structure.  Analysts have a consensus price target of $27.33.

Harman International Industries Inc. (NYSE: HAR) saw a rise of 51.5% as the stock rose from $28.53 on a dividend-adjusted basis up to $43.16. Analysts have a consensus price target of $47.25.  In late October came word of higher 2012 guidance as well as a buyback of up to $200 million in its stock over the next year.

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Aetna Inc. (NYSE: AET) Raised to Conviction Buy List at Goldman Sachs.
AMERIGROUP Corporation (NYSE: AGP) Raised to Buy at Goldman Sachs.
Eni SpA (NYSE: E) Raised to Buy at S&P.
JB Hunt Transport Services Inc. (NASDAQ: JBHT) Cut to Hold at Stifel Nicolaus.
Juniper Networks, Inc. (NYSE: JNPR) Raised to Outperform at RBC.
The Kroger Co. (NYSE: KR) Started as Neutral at JPMorgan.
News Corp. (NASDAQ: NWSA) Started as Neutral at UBS.
RPC, Inc. (NYSE: RES) Raised to Buy at Canaccord Genuity.
Safeway Inc. (NYSE: SWY) Started as Neutral at JPMorgan.
Salesforce.com (NYSE: CRM) Cut to Equal-weight at Global Equities Research.
SanDisk Corporation (NASDAQ: SNDK) Cut to Neutral at Stern Agee; named value stock of the day at Zacks.
Tanger Factory Outlet Centers Inc. (NYSE: SKT) Cut to Neutral at Credit Suisse.
TMS International Corp. (NYSE: TMS) Started as Outperform with $11 target at Credit Suisse.
Vodafone Group Plc (NYSE: VOD) Cut to Underperform as Bear of the Day at Zacks.
Watson Pharmaceuticals, Inc. (NYSE: WPI) named as Bull of the Day at Zacks.
Weyerhaeuser Co. (NYSE: WY) Raised to Hold at Deutsche Bank.
Whole Foods Market Inc. (NASDAQ: WFM) Started as Neutral at JPMorgan.

We also have some more data on analysts and the calendar.  Here are the top analyst upgrades and downgrades of the last week.  We also have the top twelve earnings reports and an economic calendar for what is coming down the pipe this week.

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JON C. OGG