Earnings Preview: Cisco Systems

Cisco Systems (CSCO) is expected to report Q4 earnings after market close Tuesday, Aug. 5, with a conference call scheduled for 4:30 pm ET.

Guidelines

The consensus estimate is 39c for EPS and $10.31B for revenue, according to First Call. Guidance from the last earnings call was for revenue growth of 9% to 10% YoY, for operating expenses in the range of 36% to 37% of revenue and a tax provision of approximately 24%. Guidance further long-term was for growth projections of 12% to 17%.

Analyst Views

Focus in the quarter will be on emerging markets, switches and carrier. Gross margin is expected to be 64.9% and operating margins are expected to be 28.4%. UBS expects Cisco to report an in-line quarter of 39c and $10.256B, but expects flat guidance for Q1 and no guidance for FY09. Banc of America expects Cisco to report in-line Q4 results and guide to Street estimates, which are 40c on $10.39B in revenue, for the October quarter. JMP Securities said that given that Cisco has become largely a revenue-growth story, the primary risk to the stock involves the global economy. As a result, analysts typically scrutinize Cisco's results for any signs of a major pullback in tech spending, particularly from the corporate sector. And, RBC said it is looking for strong execution when Cisco reports. The firm expects revenues may reach the high end of the guidance range of $10.28B to $10.38B. Non-GAAP earnings may be 1c better than street's 39c as EPS upside may come from decreased share count as Cisco repurchased $2B in stock and reigned in hiring to moderate expenses.

Looking forward: Morgan Keegan expects management remains upbeat regarding long term growth, yet it remains cautious near-term due to challenging macroeconomic conditions and expect a sales forecast below the Street's 1% sequential growth. Citigroup expects there to be no formal guidance for FY09, albeit there will likely be some reference to returning to target growth rates sometime during the course of the year. Consensus for FY09 is $1.69 and $43.71B in revenue.