What to Look for in Cisco Earnings

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Cisco Systems Inc. (NASDAQ: CSCO) is set to report its fiscal first-quarter financial results after the markets close on Wednesday. The consensus estimates call for $0.59 in earnings per share (EPS) and $12.33 billion in revenue. In the same period of last year, the company posted EPS of $0.59 and $12.68 billion in revenue.

Analysts across Wall Street point to an estimated double-digit bookings momentum for Cisco’s Meraki Cloud Services. Many think that Meraki is likely to be a $1 billion plus run-rate business this year, with an incredible 50% to 70% compounded annual growth rate. A jump from 40 GE to 100 GE data center switching and next generation security are also adding to the total sales profile and product mix.

During the most recent quarter, rumors arose that Cisco would be cutting a significant number of its employees in a restructuring plan. The company confirmed the rumors, but the numbers were not as high as initially suspected. Cisco intends to eliminate up to 5,500 positions, which represents about 7% of its global workforce. The plan is expected to commence in the first quarter of 2017.

Oppenheimer commented on Cisco’s layoffs:

We think flexible net headcount reductions give Cisco room to deliver on earnings if macro deteriorates further, helping to derisk FY17 estimates. Buybacks and dividend yield offer strong protection to investors.

Ahead of the earnings report, a few analysts weighed in on Cisco:

  • Oppenheimer has a Buy rating with a $34 price target.
  • Baird reiterated a Buy rating.
  • Deutsche Bank reiterated a Buy rating with a $37 price target.
  • JMP Securities reiterated a Market Perform rating.
  • Merrill Lynch reiterated a Neutral rating with a $33 price target.
  • RBC Capital Markets reiterated an Outperform rating with a $35 price target.
  • Raymond James has an Outperform rating with a $34 price target.

So far in 2016, Cisco has outperformed the markets, with the stock up over 16%.

Shares of Cisco were trading at $31.67 on Wednesday, with a consensus analyst price target of $33.50 and a 52-week trading range of $22.46 to $31.95.