Earnings season has been treacherous so far for some popular U.S. tech stocks, but Cisco Systems, Inc. (Nasdaq: CSCO) is hoping to impress Wall Street when it reports its earnings on Wednesday afternoon. Analysts have high hopes for Cisco’s numbers and say the company likely took another step in the right direction in its fiscal fourth quarter.
Consensus analyst estimates are calling for Cisco to report fourth-quarter earnings per share of 69 cents. Analysts are also expecting revenue of $12.77 billion, up 5.2 percent from a year ago.
GBH Insights head of technology research Daniel Ives says CSCO investors can expect some modest upside to the fourth-quarter numbers thanks to improving execution and Cisco’s focus on recurring revenue. Ives says new cloud, security and Internet of Things product initiatives will also be drivers for Cisco, and the company has a strong pipeline headed into fiscal 2019.
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“Our channel checks this quarter indicate that Cisco should report at least in-line results for [the] July quarter,” Ives says.
Ives says customers and partners have been receptive to Cisco’s duel hardware and software approach, and that satisfaction should translate to a solid quarter.
In addition to top- and bottom-line numbers, investors will also be watching for commentary regarding Cisco’s $2.35 billion buyout of Duo Security announced earlier this month. Morningstar analyst Mark Cash says the Duo acquisition was a shrewd move for Cisco and could open up opportunities for the company in the cloud services space.
“We believe this acquisition will strengthen Cisco’s overall portfolio and is in-line with the company’s plan to provide more software and services in cloud-based environments,” Cash says.
Investors will also be watching to see if CSCO is making progress in shifting its revenue mix away from hardware sales. Cisco has a long-term goal of raising its software and services revenue from 43 percent of total revenue in 2017 to at least 50 percent of total revenue by 2020.
“We assess Cisco’s plan as the correct direction for sustainable growth and believe the firm will meet or exceed its software and services revenue goal,” Cash says.
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GBH Insights has an “attractive” rating and $51 price target for Cisco. Morningstar has a “fairly valued” rating and $41 fair value estimate for CSCO stock.
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Cisco Systems, Inc. Earnings: What To Expect From CSCO Stock originally appeared on usnews.com
