Earnings Preview: Cisco

Cisco Systems (CSCO) reports Tuesday after the close. Here's what to look for:

Analysts are modeling revenues of $8.2 billion (+1.0% Quarter over Quarter; +24.7% Year over Year) and EPS of $0.28, after deducting $0.03 for options. Based on checks, CSCO can deliver a modest revenue beat and a penny of EPS upside.

Operating margin expansion will be limited in the near-term, and therefore the stock is fairly valued. Checks indicate that CSCO continues to see strong top line momentum. In particular, the demand pipeline for the CRS-1 core router continues to build rapidly. With the CRS-1, CSCO will continue to take market share over the coming year.

The Advanced Tech segment will also be a key growth driver, led by robust market demand for SFA products and solid execution in VoIP. We also expect good performance from enterprise switching and routing, as market conditions remain strong and benefited from seasonality. From a geographic perspective, we expect solid trends in the US, Europe, and emerging markets.

Expect CSCO to endorse Street revenue and EPS expectations. In the near term, upside in OMs beyond the 30% level will be limited because of proactive investments that CSCO is making in sales and engineering headcount. Expect investments to be focused on market development in emerging geographies, seeding the new Media Solutions Group, and new platforms for the service provider edge and enterprise core.

Editor's note: Read Cisco's conference call transcript here, as soon as it's available.

CSCO 1-yr chart: