Bracing for Cisco Earnings (CSCO, HPQ, ORCL)

Cisco Systems Inc. (NASDAQ: CSCO) is on deck for earnings after the close of trading, and for technology and enterprise spending this will be one of the most important earnings reports capping this earnings season.  Thomson Reuters has estimates at $0.39 EPS and revenues of $10.24 billion.  We will be looking at guidance more than the actual past quarter, but of course the devil is always in the details.  There will be far more to consider today than just the earnings and revenues.

Estimates for the next report are $0.41 EPS and $10.68 billion in revenues.  The next quarter will also mark year-end, and the estimates are $1.55 EPS for 2010 and $1.74 EPS for 2011.  The revenue estimates are $39.75 billion for 2010 and $45.18 billion for 2011.  That revenue growth represents about 10% this year and 13.7% for next year, and it is worth noting that Chambers usually offers up growth in percentages on his conference call rather than on steadfast hard numbers.

The earnings projection from Whispernumber.com is $0.41 EPS, $0.02 ahead of consensus.  The Whispernumber.com service has also noted that Cisco beat the whisper number in past 5 out of 6 reports.

The single biggest initiative is no longer about Telepresence… it is about the data center wars (unified computing systems).  That has it in direct competition now with Hewlett-Packard Co. (NYSE: HPQ) and others.  Still, Cisco is a key bogey for enterprise spending and telecom cap-ex.  On the enterprise spending, but on a different aspect, Oracle Corporation (NASDAQ: ORCL) is used as the direct-indirect comparison despite the software vs. hardware angle.  The recent Sun Microsystems merger only makes that tie even deeper.

There is of course going to be a hard look into what Chambers says has come from the most recent financial crisis in Europe.  Investors will need to pay close attention not so much to the last month, but what Chambers says will be the new trends in the E.U.  In short, did the Eurozone bailout instantly correct the enterprise fears that had to be present or are purchasing managers staying very reserved and cautious on forward enterprise spending and tech buildouts????  The reality is that Cisco will give us the first real opinion on this from a U.S. company.

It is easy to note that an enterprise spending recovery started toward the end of 2009 in the United States and many emerging markets.  Again, Europe could be the linchpin.

Cisco shares are up 2.8% at $26.71 and that is after a small drop yesterday of less than 1%.  Still, this move ahead of earnings is having an impact on using options for “expected move projections” in the after-earnings stock price.  Based on a quick-take, it looks as though options traders are not expecting more than a $1.00 move in the stock after earnings.

As far as the charts are concerned, Cisco’s 52-week range is $17.61 to $27.74.  The latest down-move in the market took shares under the 50-day moving average (listed as $26.42 today).  The 200-day moving average is all the way down at $24.10 and the low (I say a fake low) on the Flash Crash Thursday was listed as $23.23 with a $25.49 close.  The low on Friday was $24.33 and the close was listed as $24.71.  Before early last week, Cisco’s chart had been on an up and away trajectory.  Depending upon today, some may say the new chart looks more range-bound than anything.

Thomson Reuters shows that analysts have an average price target that is now almost $30.00.

JON C. OGG