Technology

Will Cisco Earnings Give Any Clue to China Trade Talks?

Chris Lange

Published: November 13, 2019 11:20 am

Last Updated: January 30, 2020 1:13 pm

Cisco Systems Inc. (NASDAQ: CSCO) is scheduled to release its fiscal first-quarter financial results after the markets close on Wednesday. The consensus estimates are calling for $0.81 in earnings per share (EPS) and revenue of $13.09 billion. In the same period of last year, the company said it had EPS of $0.75 and $13.07 billion in revenue.

The company previously issued guidance for the fiscal first quarter. Cisco expected to see revenue flat to up 2% year over year and EPS in the range of $0.80 to $0.82. Gross margin was tabbed at 64% to 65% (compared to 63.9% in the fourth quarter of 2019) and operating margin was expected to come in at 32% to 33% (versus 32.6% in the fourth quarter).

The first-quarter outlook reflected little to no growth, and the U.S. trade question with China was unlikely to help Cisco.

In the fiscal fourth quarter, the company’s quarterly results were just barely enough to exceed estimates, but a narrow hit is no different from a big miss these days. For the 2019 fiscal year, sales in the company’s Asia-Pacific/Japan/China business unit rose 3% to $7.85 billion, but fourth-quarter sales were down 4% to $2 billion.

Excluding Wednesday’s move, Cisco had underperformed the broad markets, with the stock up nearly 12% year to date. In the past 52 weeks, the stock was up closer to 3%.

A few analysts weighed in on Cisco ahead of the report:

• RBC has a Buy rating with a $56 price target.
• Piper Jaffray has a Neutral rating with a $51 target.
• Baird’s Buy rating comes with a $54 target price.
• Credit Suisse has a Neutral rating with a $49 price target.
• KeyCorp rates it as Overweight with a $54 target price.
• Goldman Sachs has a Neutral rating and a $48 price target.
• Evercore ISI’s Outperform rating comes with a $60 target.

Shares of Cisco traded up less than 1% to $48.70 on Wednesday, in a 52-week range of $40.25 to $58.26. The consensus price target is $54.96.