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By: Brendan Gilmartin

Cisco Systems (CSCO) is slated to report 1Q 2013 earnings after the close of trading on Tuesday, November 13. The results are typically available at 4:05 p.m. EST and will follow with a conference call at 4:30 p.m. Given its size and influence, Cisco has the potential to impact the broader market gauges, including the index futures and large-scale ETFs.

In the previous conference call, Cisco said 1Q 2013 Non-GAAP EPS is expected to range from $0.45 to $0.47 per share. The current consensus is $0.46 (Source: Yahoo! Finance).

Revenues are the next most important measure for Cisco. Cisco previously said it expects 4Q 2012 revenues to increase 2% to 4% year over year. Based on the 1Q 2012 revenue figure of $11.260 bln, the projected range would equate to $11.481 bln to $11.706 bln. The consensus is $11.79 bln.

Note that Cisco typically provides upcoming quarterly guidance in the ensuing conference call following the earnings release. CEO John Chambers tends to be conservative in his outlook, resulting in a share price reversal. For the 2Q 2012 period, estimates are for Non-GAAP EPS of $0.48 on revenue of $12.07 bln.

Last quarter, CEO John Chambers stated in the conference call there were three primary concerns facing Cisco:

  • 1.) Challenging environment in Europe.
  • 2.) Weaker global public spending, especially in the U.S.
  • 3.) Challenging global macro backdrop.

Sympathy Plays: Juniper Networks (JNPR), F5 Networks (FFIV), Riverbed (RVBD), Radvision (RVSN) & Cavium (CAVM).

Cisco continues to aggressively repurchase shares. At the end of the 3Q period, Cisco repurchased 27 million shares of common stock under the stock repurchase program.

Recent News

 

  • 11/12: Caris & Co. believes Cisco Systems will post earnings and guidance below consensus estimates, according to a report on Barron's Online. The cautious view was based on the weaker macro backdrop.
  • 11/09: JP Morgan Chase downgraded Cisco Systems from Overweight to Neutral, according to a post on Barron's Online. The firm believes the macro environment remains a challenge for Cisco with tough conditions likely to persist into fiscal 2012.
  • 11/06: MKM Partners maintained a Buy on Cisco Systems, but lowered the price target to $23.00, according to a report on StreetInsider.com. The firm suggested order acceleration stalled in September/October.


Technical Review

Cisco Systems shares are off nearly 14% from the September highs, breaking key support near $17.00. From here, there is downside risk to $16.50, followed by $16.00 and the July nadir close to $15.00. But with the Relative Strength Index (RSI) near 30, the shares are technically oversold near-term, implying the shares may bounce so long as earnings are either above or at the high end of the guidance provided last August. (Chart courtesy of StockCharts.com)

Summary

Cisco Systems shares have come under heavy pressure in recent weeks amid concerns over slower spending both in North America and abroad, coupled with an uncertain picture for 2013. But with the shares down 14% from the recent highs, technical indicators reflecting oversold conditions, a single-digit forward P/E multiple, and hefty 3.33% dividend yield all suggest the market has priced in the anticipated weakness and dour outlook headed into fiscal 2013.

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Source: Cisco Systems Reports On Tuesday; Have Shares Priced In Weak Results?