What to Expect From Cisco Earnings

While everyone will be watching the report closely, 24/7 Wall St. will be looking at this report for a comparison of enterprise spending, since John Chambers is deemed such a barometer for the enterprise technology market — and to make sure they don’t unexpectedly have the same nasty report that IBM had. Shares were trading at $25.20 late on Monday, just two days before the report. The consensus analyst price target was $26.50, and Cisco’s 52-week range was $20.22 to $26.08.

One thing that will keep investors’ attention is how much Cisco is buying back in stock and paying out in dividends. The company returned $13.3 billion in dividend and buyback payments over its latest fiscal year ending last quarter. Cisco’s cash and cash equivalents were $52.1 billion at the end of its last quarter.

As of July 26, 2014, Cisco’s lifetime stock buyback plan had retired 4.3 billion common shares, with an average price of $20.63 per share for a total purchase price of approximately $88.4 billion. The remaining authorized amount for stock repurchases under this program was approximately $8.6 billion at the end of the last quarter with no termination date. Cisco’s current market cap is roughly $128 billion.

Another issue is that Cisco seems to be stuck in a restructuring feedback loop. That may be ending, but bad habits are often hard for a company to break. That being said, Cisco remains the king of big technology dividends with a 3% yield.

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Cisco’s chart is showing mixed signals of late. After breaking down under the 200-day moving average in October’s selling panic, the stock went almost as low as $22.50. Now it is above $25. The area around $25.30 to $25.40 was resistance at the start of October and then acted as resistance again last week. The current 50-day moving average is down at $24.43 and the current 200-day moving average is lower at $23.61. Both readings will change slightly by the time the company reports earnings.

We will provide a more detailed earnings preview on Wednesday morning ahead of Cisco’s formal earnings report.