Full Expectations For Cisco Earnings (CSCO, JNPR, BRCD, COMS, ALU)

Cisco Systems, Inc. (NASDAQ: CSCO) is set to report earnings after the closing bell on Wednesday.  Be advised that estimates could change ever so slightly before the formal number if there are any last minute changes from analysts.  Thomson Reuters has the estimates pegged at $0.29 EPS and $8.52 billion in revenues.  This will also mark Cisco’s fiscal year-end for 2009.  The guidance and the tone in CEO John Chambers’ voice will probably be more important here than the EPS figure.

As far as what is ahead, Thomson Reuters has estimate of  $0.29 EPS and $8.59 billion in revenues for the next report.  For fiscal 2010, estimates are $1.28 EPS and $35.94 billion in revenues compared with  $1.32 EPS and $36.1 billion in revenues for 2009.

The options trading price expectations will certainly change throughout Wednesday, but the Tuesday closing levels is indicative of a move of up to about $1.00 in either direction.  While there is still a positive bias on the “ratings” there is an average target in our universe of roughly $23.50 to $24.00.

The chart may perhaps be the most important issue.  This stock has risen from $18.00 to $22.39 since the 4th of July.  Despite a drop of 0.8% on Tuesday, yesterday’s up close and today’s drop do not show any significant sell signal.  But it is also worth noting that Cisco’s stock could literally fall back by $2.00 and still not create any significant damage to its chart on a longer-term basis.

Cisco earnings will have an indirect impact on perhaps everything on the NASDAQ after the report.  Directly, we’d look at Juniper Networks (NASDAQ: JNPR) for the first reactionary trade on the stock and then Brocade Communications Systems, Inc. (NASDAQ: BRCD).  It is almost embarrassing to even make the comparisons, but 3Com Corporation (NASDAQ: COMS) and even Alcatel-Lucent (NYSE: ALU) would be the tertiary stocks to watch.

There is a key takeaway here is John Chambers.  Chambers has to effectively convince those listening to the conference call that recent weeks have started to show a return of orders.  Announcing more layoffs or cost cuts and saying that things are still bottoming out will probably have profit takers active in the stock on Thursday.  Still, its chart has plenty of cushion in it before key support levels would come into play.

JON C. OGG
AUGUST 4, 2009