Technology Could Take Off Big Time If Cisco Beats Earnings Estimates

By Lee Jackson Updated Jan 13, 5:15PM EST · Published Nov 12, 12:10PM EST

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After the closing bell Thursday, Cisco Systems Inc. (NASDAQ: CSCO) will report first-quarter fiscal 2016 results. The networking giant, which is considered a bellwether technology stock, could help to lead the way for a push higher in technology. Despite an incredible nonfarm payroll report last Friday, the market has been taking it on the chin this week, and most of the indexes are either break-even or down for the year.

Most of the firms that we cover here at 24/7 Wall St. are reasonably optimistic that Cisco will come in at or above the current consensus estimates. One of the hot topics concerning the company lately was the recent deal it signed with Ericsson. The two firms have announced a major partnership covering service provider, enterprise and Internet of Things markets. They expect incremental revenues from the deal in 2016, and for each to have over $1 billion in additional sales by 2018. The deal took over a year to put together and is considered by some to be a negative for Juniper Networks.

Recently Cisco has contended with a slowdown in demand from service providers and telecom carriers, as well as weak results in select emerging markets and concerns that the software defined network (SDN) will enable competitors to gain market share in the switching market, which is a very lucrative business for Cisco.

Analysts across Wall Street point to an estimated double-digit bookings momentum for Cisco’s Meraki Cloud Services. Many think that Meraki is likely to be a $1 billion plus run-rate business this year, with an incredible 50% to 70% compounded annual growth rate. A jump from 40 GE to 100 GE data center switching and next generation security are also adding to the total sales profile and product mix. This is another company leveraged to the huge deployments at data centers and that growth is not expected to stop any time soon.

The consensus Wall Street estimates for the most recent quarter are revenues of $12.65 billion and earnings per share of $0.56. Specifically, profits for the first quarter of fiscal 2016 are anticipated to increase 4% year over year and sales are expected to grow 3.3%, according to data from The Wall Street Journal.

The stock traded up Thursday, and that reflects an overall Wall Street positive feeling for the numbers — especially on a day when the rest of the market is acting very poorly. Cisco is also one of the 24/7 Wall St. top 10 stocks to own for the next decade.

Cisco investors are paid a solid 3% dividend. The Thomson/First Call consensus price target for the stock is $31.14. Shares were trading near midday at $28.00.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.