Cisco Systems, Inc. (CSCO) Earnings, What To Expect?

ciscoBy Cisco [Public domain], via Wikimedia Commons

Cisco Systems, Inc. (NASDAQ:CSCO) will report its first quarter FY 2014 earnings today, and is expected to  “execute well” and draw benefit from its new products, according to Cantor Fitzgerald analyst Brian J. White. For the earnings season as a whole, the analyst believes IT spending and the macroeconomic environment to be soft reflecting the trend in the tech world.

Q1 estimates for Cisco

Analyst Brian J. White expects Cisco to post revenue in line with its estimate of $12.34 billion and the consensus estimate of $12.36 billion. Pro forma earnings per share is expected to be $0.51, which is the same as the consensus estimate. Cisco has guided earnings per share for the first quarter to come in at $0.50-$0.51, and sales are expected to grow at 3%-5% year on year, which translates to $12.23-12.47 billion.

Cisco Systems, Inc. (NASDAQ:CSCO) is expected to post operating margins at 28.3% for the first quarter of FY 2014 compared to 28.2% in the fourth quarter of FY 2013, and 27.9% in the previous year. The company has performed well from the margins perspective, according to the analyst.

Plethora of new products

The report notes that United States federal spending, as well as China, will underperform in the first quarter of 2014, whereas data center and the U.S. market will outperform. Cisco Systems, Inc. (NASDAQ:CSCO) was rapidly launching new products over the past few months, along with rolling over its Application-Centric Infrastructure (ACI) platform that included the Nexus 9000. The company launched Network Convergence System (NCS) family aimed at the ‘internet of everything’ (IoE) and other new switch innovations were launched at Cisco Live! in June.

For the first quarter of 2014, analysts are expecting NGN Routing sales to drop 2% quarter on quarter and switching sales to come in down 1% sequentially. Also, new products sales are estimated to be flat and service revenue will probably increase 1% quarter on quarter.

Q2 outlook cautious

For the second quarter of FY2014, Cisco Systems, Inc. (NASDAQ:CSCO) is expected to reflect a cautious outlook on the back of soft IT spending this earnings season. But analysts are expecting that their revenue expectations of $12.37 billion would be within the guidance range of the company. The analyst believes that consensus estimates of $12.61 billion are very high, whereas analyst estimates of earnings per share at $0.51 is achievable.

Analyst Brian J. White has a Buy rating on Cisco Systems, Inc. (NASDAQ:CSCO) with a price target of $29.50.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com

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