By Craig Bowles
Cisco Systems, Inc. (NASDAQ:CSCO) is slated to report 4Q 2014 earnings after the bell on Wednesday, August 13th. The earnings release is expected at approximately 4:05 p.m. EST with a 4:30 p.m. conference call webcast available through Cisco Investor Relations. The company represents the networking equipment industry on the S&P 500 Index.
Outliers & Strategy
- Non-GAAP Earnings Per Share: The current Street estimate is $0.53 (range $0.51 to $0.54). (Source: Yahoo! Finance).
- Revenues: Analysts expected a decline of 2.2% y/y to $12.14 bln (range $11.80 bln to $12.25 bln).
- Cisco's trailing P/E of 16.9 compares to a five-year average of 16 and industry average of 25.5. The Price/Book is 2.3 versus a five-year average of 2.4 and industry average of 2.6. The dividend yield is 2.9% vs. an industry average 1.9%.
- Insiders have sold 5,239,843 shares over the past year and 3,609,406 shares just in the last three months. The company announced a $15 bln buyback in November and sold $8 bln of bonds in February to help fund repurchases, so they've been able to support the price above $24.30 during most of the recent insider selling. Doing so isn't illegal but is reminiscent of the money center banks before 2008.
- Cisco is compared other networking equipment companies with quarterly results possibly impacting Alcatel Lucent (ALU), Hewlett-Packard (NYSE:HPQ) and Juniper Networks (NYSE:JNPR).
- Cisco shares have a 1-day average price change on earnings of 6.19%. Options are pricing in an implied move of 5.17% on earnings.
- 08/04: Cisco Systems was added to Oppenheimer's S&P 500 Buy List citing the stock is at similar levels that marked a turnaround in 2002, but noted a needed breakout above $26.50 resistance, according to a post on 247wallst.com.
- 08/04: July began with the options market call/put 20-day MA at the unusually high reading of 2x. TD Ameritrade Client Activity for July hit the second-highest reading since its inception in 2010 but they were selling Cisco, according to a post on Benzinga.com.
- 07/31: Cisco supplier Cavium (NASDAQ:CAVM) beat EPS and revenue estimates and guided above estimates, according to a post on InvestorsDaily.com.
- 07/28: Pacific Crest Securities downgraded Cisco to sector perform from outperform citing margin pressure as it moves to the cloud, according to a post on InvestorsDaily.com.
- 07/23: Competitor Juniper Networks earnings came in just a hair below analyst estimates with soft third-quarter guidance and shares plunged as much as 11.4%, according to a post on Fool.com.
While Cisco doubled from 2011's low to 2013's high, the stock has generally been flat for the last decade fluctuating around $20. The stock has ranged from $13-$26 since 2008. The recent support area around $24.50 appears to be important as below that is the 200-day moving average area down near $23. (Chart courtesy of StockCharts.com)
Cisco has beaten estimates by 1-3c over the last four quarters and the stock only moved higher on the 3c beat. Cisco's revenue decline is expected to turn around in fiscal year 2015, so market participants aren't expecting much this quarter and probably EPS of 55c with revenue above $12.18 bln would be viewed favorably. Last year, a positive 3Q market reaction was followed by negatives the next three quarters, hopefully there's not seasonality to market reactions for earnings. More favorable year over year revenue comparisons could bring increased investor optimism in the coming quarters while speculation will increase around possible replacements for the eventual retirement of CEO John Chambers.
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