Can Cisco Keep Up the Pace With Earnings?

Chris Lange

Cisco Systems Inc. (NASDAQ: CSCO) is scheduled to release its most recent quarterly results after the markets close on Wednesday. The consensus estimates from Thomson Reuters call for $0.65 in earnings per share (EPS) on $12.44 billion in revenue. The fiscal third quarter of last year had EPS of $0.60 and $11.94 billion in revenue.

Cisco has led the Dow Jones industrials for a fair amount of 2018, and it doesn’t seem to be stopping any time soon. Over the past 52 weeks, Cisco has outperformed the broad markets, with its stock up about 33%. In just 2018 alone, the stock is up nearly 19%.

For its previous quarter, the company reported outstanding results and a huge stock buyback as well. Adjusted earnings per share were up 10% from a year ago, with revenue rising 3% and topping consensus estimates. Along with a massive $25 billion share buyback plan, investors should be well rewarded going forward.

Cisco already was rated as Buy at Goldman Sachs, but the firm’s Rod Hall added the stock to the prized Conviction Buy list back in March. Hall also juiced up his price target to $54 from $51. That represented 25% in implied upside from the prior $43.07 closing price, and that is before considering Cisco’s nearly 3% dividend yield for longer-term total return investors.

Along with the increased buybacks targeted from Cisco, the Goldman Sachs report said this:

We expect Cisco to deliver significant returns to shareholders from the recently enacted tax laws. Indeed, the company has already announced a $25 billion increase to share repurchase authorization, and hiked its dividend payout ratio to nearly 50 percent (of earnings).

A few other analysts also weighed in on Cisco ahead of the report:

  • Credit Suisse has a Neutral rating with a $41 price target.
  • JPMorgan has an Overweight rating and a $57 price target.
  • Macquarie has an Outperform rating.
  • Piper Jaffray has an Overweight rating with a $49 target.
  • Citigroup has a Buy rating with a $52 price target.

Shares of Cisco were last seen trading at $45.37, with a consensus analyst price target of $49.71 and a 52-week range of $30.36 to $46.37.