What to Expect From Cisco Earnings

Cisco Systems Inc. (NASDAQ: CSCO) is scheduled to report its fiscal third-quarter financial results after the markets close on Wednesday. The consensus estimates are calling for $0.58 in earnings per share (EPS) and $11.89 billion in revenue. In the same period of last year, Cisco posted EPS of $0.57 and $11.89 billion in revenue.

So far in 2017, Cisco has outperformed the broad markets, with the stock up 15%. Over the past 52 weeks, the stock is actually more than 31% higher.

Just recently Credit Suisse had a real change of heart on this company and upgraded it from “a screaming sell” to a “screaming buy.” The firm raised its rating on Cisco to Outperform in a total reversal from its prior Underperform rating. The analyst also raised the old price target from an unimpressive $27 all the way up to $40.

The brokerage firm identified three top potential M&A targets, and included an outlook that simultaneously assesses capital return in a tax-repatriation environment. The firm also is segmenting Cisco’s switching business by vertical for the first time and has built out a conservative long-term scenario that shows earnings growth despite switching pressure.

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The report admits that this is a double upgrade (hence to Outperform rather than just to Neutral). Investors need to also consider that Credit Suisse’s old price target was actually the most negative sell-side target on all of Wall Street. The firm’s report said:

We believe that the company is assembling a portfolio of businesses, which should allow it to produce low single digit revenue growth and continued operating leverage. Furthermore, we believe the possibility of an upcoming repatriation and balanced approach towards M&A and capital return could drive long EPS power towards $3.30-$3.50. This would diversify Cisco away from the challenged economics in networking, which we believe we have fully embedded in our estimates.

Prior to the release of the earnings report, a few other analysts also weighed in on Cisco:

• Drexel Hamilton has a Buy rating with a $40 price target.
• Morgan Stanley has an Overweight rating with a $39 price target.
• BMO Capital Markets has a Market Perform rating with a $35 price target.
• Robert Baird has a Buy rating.
• Jefferies has a Buy rating with a $37 price target.
• Barclays has an Overweight rating.
• Deutsche Bank has a Buy rating with a $42 price target.
• Cowen has an Outperform rating with a $39 price target.

Shares of Cisco were last seen down 0.5% at $34.13 on Wednesday, with a consensus analyst price target of $35.84 and a 52-week trading range of $26.49 to $34.60.

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