Full 360-Degree Cisco Earnings Preview (CSCO, JNPR, ALU, ORCL, INTC, HPQ)

Cisco Systems, Inc. (NASDAQ: CSCO) is set to report earnings after the close of trading on Wednesday.  We have already signaled that Cisco could hold the key to how technology shares are received for the days and even weeks ahead.  So far the “Sell in May and go away!” theme is what seems to be working.

Thomson Reuters has estimates of $0.47 EPS and $11.57 billion in revenues.  Guidance is not offered usually until the conference call but the estimates for the current (July) quarter are $0.49 EPS and $11.99 billion in revenue.

The first real inference today is that Juniper Networks, Inc. (NYSE: JNPR) and Alcatel-Lucent, S.A. (NYSE: ALU) both have slid lower since their earnings.  Juniper looked like it was a stabilization after a really bad drop, but the initial stock pop higher was sold off immediately and its stock price is now under where it was before earnings.  Alcatel-Lucent is now under $1.50 after recently giving a poor earnings report that brings up relevance into question.

Our main reason for putting Cisco as the lynchpin for technology is that it often acts as a preview to Oracle Corporation (NASDAQ: ORCL) as the other off-quarter earnings from the technology leadership.  Oracle has historically been more of a software play but the comparison is still crucial.  Cisco grabs a different part of the enterprise technology spending dollars, but weakness in one may mean weakness in another as technology officers can push orders out further on the horizon.

Cisco has also been in the midst of a restructuring that seems to be mostly complete.  The problem is that shares have slid from recently being above $20.00 down to $18.70.  Thomson Reuters has a consensus price target of $22.58 and the 52-week range is $13.30 to $21.30. The company’s market cap today is right at $100 billion.

The stock chart may hold the keys to the post-earnings reaction after today.  With a price of $18.70, the 200-day moving average is down at $18.14 and the 50-day moving average is up at $19.96.  In short, Cisco had recovered handily off of its lows in the last year but its stock has been very weak for the last month and $20.15 to $20.20 acted as very strong resistance on the chart throughout April after shares slid from the peak of just over $21.00.

Options traders appear to be braced for a move of up to about $0.75 or so in either direction based upon the speculative call and put options pricing.

Just one suggestion for Cisco not pertaining its earnings call: the investor relations site takes far too long to navigate.  Still, the stock trades at only about 10-times current earnings expectations.  Does that make Cisco a value stock in its turnaround, or is Cisco’s turnaround just a value trap.

We would note one strength from the last quarter… gross margin rose to 61.3% from 60.2% and the cost of sales rose by more than 7%.

Keep in mind that Cisco’s earnings will prelude an investor day presentation by Intel Corporation (NASDAQ: INTC) on May 17, 2012 and it will also prelude the Hewlett-Packard Co. (NYSE: HPQ) earnings report currently penciled in around May 23, 2012.

JON C. OGG