Analyst Previews Cisco (CSCO) Earnings; Sees FY10 Guide Down
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36 Buy, 26 Hold, 0 Sell
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Today's Overall Ratings:
Up: 5 | Down: 11 | New: 26
Rating Summary:
36 Buy, 26 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 5 | Down: 11 | New: 26
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Broadpoint.AmTech is out with a research note previewing Cisco's (Nasdaq: CSCO) Q2 earnings, which will be out today after the market close. The firm believes expectations for the January quarter "seem low given the credit crunch, US service provider capex cuts, and competitive pressure from Hewlett-Packard (NYSE: HPQ) and Juniper Networks (Nasdaq: JNPR). AmTech maintains its Neutral rating on shares of Cisco.
The firm sees Cisco reporting an in-line Q2, but a Q3 guidance trim and FY10 guidance which will likely be below the Street's current estimates. Broadpoint.AmTech is estimating Q3 EPS of $0.29 on sales of $8.7 billion. This level of revenue suggests a 2% slide in sales on a quarter-over-quarter basis, but the firm notes its belief that "buy-side expectations are closer to down 5-8% q/q."
For FY10, AmTech believes EPS guidance could move lower to $1.30-$1.40, which would be below the Street's current estimate of $1.42. In contrast, the firm points out that this level of sales assumes Cisco will report flat FY10 revs and be able to maintain 65% gross margins and 25% operating margins. Assuming FY10 sales fall 5% from '09 and operating margins fall to 23%, however, AmTech sees FY10 EPS moving to $1.10-$1.15. "Every 100bps in margins at the $40bil level equates to about a nickel in EPS."
AmTech says that while it sees Cisco ultimately recovering with the rest of tech, it is no longer "comfortable with the consensus view of CSCO as a 'defensive name' that will gain share in the downturn." Keeping this in mind, the firm said it "would be inclined to sell a 'better than feared' pop."
Shares of Cisco are seeing upside ahead of today's expected earnings report. The stock most recently traded at $15.99, up 2.4% from yesterday's close.
The firm sees Cisco reporting an in-line Q2, but a Q3 guidance trim and FY10 guidance which will likely be below the Street's current estimates. Broadpoint.AmTech is estimating Q3 EPS of $0.29 on sales of $8.7 billion. This level of revenue suggests a 2% slide in sales on a quarter-over-quarter basis, but the firm notes its belief that "buy-side expectations are closer to down 5-8% q/q."
For FY10, AmTech believes EPS guidance could move lower to $1.30-$1.40, which would be below the Street's current estimate of $1.42. In contrast, the firm points out that this level of sales assumes Cisco will report flat FY10 revs and be able to maintain 65% gross margins and 25% operating margins. Assuming FY10 sales fall 5% from '09 and operating margins fall to 23%, however, AmTech sees FY10 EPS moving to $1.10-$1.15. "Every 100bps in margins at the $40bil level equates to about a nickel in EPS."
AmTech says that while it sees Cisco ultimately recovering with the rest of tech, it is no longer "comfortable with the consensus view of CSCO as a 'defensive name' that will gain share in the downturn." Keeping this in mind, the firm said it "would be inclined to sell a 'better than feared' pop."
Shares of Cisco are seeing upside ahead of today's expected earnings report. The stock most recently traded at $15.99, up 2.4% from yesterday's close.
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