360-Degree Cisco Earnings Preview: Peers Await (CSCO, JNPR, ALU, RVBD, BRCD)

Cisco Systems Inc. (NASDAQ: CSCO) is set to report earnings after the close of trading and Wall Street is expecting a better report than what it had heard from the company earlier this year.  This will bring an update on the company’s layoffs and reorganization as well.

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