Cisco earnings preview

Internet networking giant and Dow component Cisco Systems reports its fiscal fourth quarter earnings after the US markets close on Wednesday 14 August and big things are expected.

Cisco Systems, the global IT company that specialises in internet networking products, soared more than 10% the last time that it reported, as earnings comfortably exceeded expectations. This time around, expectations are high, with the consensus of Wall Street analysts polled by Bloomberg being earnings of 47 cents per share (GAAP), compared with 42 cents per share for the same quarter last year.

Revenue is expected to grow 6% from a year ago to $12.4 billion for the quarter. According to Zacks, 77% of analysts grade Cisco Systems as a buy, which is far higher than its leading competitors, which include Juniper Networks and Alcatel-Lucent.

Cisco acquired SolveDirect at the end of April, a cloud-based integration service for exchanging data, and I will be interested to see if the company has been able to leverage further revenue from this acquisition, with cloud-based services proving a good area of growth for other IT leaders such as Oracle and IBM so far this year.

Cisco has a strong recent track record when it comes to beating analyst estimates: it has exceeded expectations for the last four quarters. Today its share price is trading around $26, having been on a strong run recently, gaining around 33% so far this year.

Interestingly, Cisco’s share price didn’t really follow suit with the broader market gains we saw at the beginning of the year, playing catch-up only once it had reported for its fiscal third-quarter back in May. This shows how sensitive Cisco’s share price can be to its results and how weak its correlation to the wider market is in comparison to some other Dow components.

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