Cisco (NASDAQ: CSCO) is scheduled to report fiscal fourth-quarter earnings on Wednesday, August 12th, after market close, always a crucial barometer for IT spending, which has proved to be boon for tech companies during the COVID-19 pandemic. That benefit has been selective, though, as work-from-home and shelter-in-place trends have favored businesses that provide the infrastructure that make that possible: namely cloud data centers, online-conferencing tools, and cybersecurity.
Cisco covers all those businesses, but it remains to be seen how well those segments will balance out with the company’s large, on-premise network appliance business, which may take a back seat as businesses are trying to move to the cloud and out of their own private data centers. That is especially true of small-to-medium-sized businesses, or SMB, which make up nearly a third of Cisco’s sales.
Raymond James analyst Simon Leopold said that large-enterprise sales, which make of about 30% of the company’s business, started to improve in June. But channel checks from SMB show weakness, he said, which could especially prove damaging to Cisco’s on-premise network sales, which account for 18% of revenue.
Service provider demand, accounting for about 20% of sales, “likely provides short term upside,” while collaboration sales, which includes WebEx videoconferencing, are positive even though they only account for about 9% in revenue. Similarly, security is a bright spot, but only accounts for about 6% of sales, Leopold said.
What to expect?
Earnings: Cisco on average is expected to post adjusted earnings of 74 cents a share, down from 83 cents a share in the year-ago period, according to a FactSet survey of 25 analysts’ estimates. Cisco forecast 72 cents to 74 cents a share. Estimize, a software platform that uses crowdsourcing from hedge-fund executives, brokerages, buy-side analysts, and others, calls for earnings of 77 cents a share.
Revenue: Wall Street expects revenue of $12.09 billion from Cisco, according to 22 analysts polled by FactSet, down from $13.43 billion reported last year. Cisco predicted revenue of $11.88 billion to $12.29 billion. Estimize expects revenue of $12.25 billion.
- The consensus EPS Estimate is $0.74 (-10.8% Y/Y) and the consensus Revenue Estimate is $12.09B (-10.0% Y/Y).
- Investors would focus primarily on upcoming FY21 guidance against the consensus EPS of $3.15 and revenue of $49.5B.
- Over the last 2 years, Cisco has beaten EPS estimates 100% of the time and has beaten revenue estimates 100% of the time.
- In the last 3 months, EPS estimates have seen 11 upward revisions and 9 downward. Revenue estimates have seen 6 upward revisions and 14 downward.
Cisco Long (Buy)
ENTER AT: 48.37