Cisco Systems is scheduled to release its next earnings report tomorrow after closing bell, and consensus estimates suggest the company will post earnings of 56 cents per share on $12.66 billion in revenue. Analysts aren’t really expecting much of a surprise are note that Cisco’s new CEO Chuck Robbins is still in the process of making changes.

Cisco Systems, Inc. Earnings Preview
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Cisco to perform in line with guidance

In a report dated Aug. 11, Wunderlich Securities analyst Matthew Robison cautioned investors not to expect “heroics” at the current stage. He pointed out that Cisco is mostly shielded from the currency headwinds which have been a drag on other tech companies’ earnings results because approximately 95% of its sales are in U.S. dollars. The networking hardware manufacturer also benefits from its domination of the industry.

The analyst noted that Cisco has a couple quarters’ worth of backlog, which position it for a performance that was in line with guidance. His earnings per share estimate is in line with consensus at 56 cents per share, while his revenue estimate is slightly ahead at $12.7 billion. Cisco management guided for earnings of between 55 cents and 57 cents per share and revenue of $12.48 billion to $12.73 billion.

Switching to continue strong performance

Wunderlich expects high-end switching to continue being a strong point for Cisco. Switching was strong over the last two quarters, but Robison thinks it’s still early in the launch of the Nexus 9000 and Nexus 3000. As a result, he expects the most recently completed quarter to again shoe higher than average growth in switching.

For routing, he expects easier comparisons as the markets begin to accept Cisco’s high-end products. He notes that the only areas of the company’s business that have been negative are Brazil, China and Russia as a result of weak orders from service providers. However, excluding service providers, the three regions recorded growth for Cisco Systems. He hopes to see demand among service providers to increase as the third fiscal quarter pushed high-end routing 5% higher due to the first quarter of “significant production use” of Cisco’s core CRS-X and NCS routers.

Cisco still adapting to new CEO

Since Chuck Robbins took over the reins at Cisco, the company has raised $4.1 billion in debt at a fixed rate of 2.4% and $900 million at LIBOR plus 31 basis points. Also the company committed to acquiring OpenDNS for $635 million, has shut down or halted production from the WHIPTAIL acquisition, and revealed plans to sell off its set-top box business early next year for about $600 million.

Robison believes the sale of the set-top box business will help Cisco’s margins. He continues to rate the company at Hold with a price target of $29 per share. As of this writing, shares of Cisco Systems were down 1.73% at $28.10 per share.