Earnings Prievew: Cisco Systems

| About: Cisco Systems, (CSCO)

Cisco Systems (NASDAQ:CSCO) is expected to report Q3 earnings after the market close on Wednesday, May 9, with a conference call scheduled for 4:30 pm ET.


The consensus estimate is 47c for EPS and $11.57B for revenue, according to First Call. Over the past year or so, Cisco has been clawing back a recovery, driven by CEO John Chambers' efforts to cut costs and redefining the company's focus. The company has now logged three consecutive earnings beats and will look to extend that streak this afternoon -- despite some tumultuous times. Company guidance from the last call is for Q3 adjusted EPS 45c-47c, adjusted gross margin approximately 61.5%-62% and an adjusted operating margin in the range of 27%-28%. The company had also said it saw "minimal impact" from Thailand floods in coming quarters. Cisco was conservative in its outlook for 2H12.

Analyst Views

Near-term, Credit Suisse expects Cisco to report solid Q3 operating results and FQ4 outlook with EPS in-line with its Street-high estimate. Credit Suisse expects to hear a familiar refrain from Chambers, namely, Cisco strongly executing against what is within its control, but is subject to ongoing macroeconomic challenges. The firm sees rising EPS forecasts for Cisco, together with multiple expansion driving 20+% upside to shares. Over the next 12-18 months, Credit Suisse sees Cisco continuing to benefit from its "low-bar" guidance reset; easy year ago growth "comps" as it moves through balance of FY12 and into FY13; improved product portfolio, competitive position and GM in its key enterprise switching and carrier routing markets. Other sources of upside: the coming 10G switching upgrade cycle; on-going UCS ramp; on-going double digit growth in WLAN and Telepresence; and follow-through on initial rebound in security.