Cisco (CSCO) Gains as Results, Guidance Signal Supply Constraints are Easing

Shares of Cisco Systems (NASDAQ: CSCO) are up almost 5% in premarket trading after the IT networking company reported solid results.

For its fiscal fourth quarter, Cisco reported an adjusted EPS of $0.83 on revenue of $13.10 billion to top the analyst consensus of $0.82 on sales of $12.73 billion. Adjusted gross margin came in at 63.3%, worse than the estimate of 64.7%.

“Total revenue exceeded our expectations in Q4, as a result of our strong execution and the numerous initiatives we have taken to reduce the impact of the global supply situation,” said Scott Herren, CFO of Cisco, said.

For this quarter, the company is looking for an adjusted EPS of $0.82 to $0.84, slightly below the consensus of $0.84. However, revenue growth is estimated at +2% to +4%, materially higher than the -0.24% consensus.

On a full-year basis, the company is looking for revenues to grow between +4% to +6%, and again higher than the estimate of +3.3%. The adjusted EPS is seen in the range of $3.49-$3.56, somewhere in line with the guidance of $3.54.

Citi analyst Jim Suva, who stands alone with the Sell rating on CSCO shares, raised the price target to $44 from $40 but remains concerned that Cisco will continue to lose share to both Arista Networks (NYSE: ANET) and Juniper Networks (NYSE: JNPR).

““Are we wrong with a sell rating?”. The sales outlook for growth of +2% to +4% is materially above consensus of -0.6% but the EPS guidance was only inline. The order growth went negative -6% y/y. Yes, the orders are impacted by difficult y/y comps but we note peers Arista and Juniper are navigating the cycle better. So, it is hard to say we are wrong or right at this time as the results and outlook give both bulls and bears ample points,” the analyst commented.

He added that Cisco’s results bode well for Jabil (NYSE: JBL), Citi’s top pick in the IT Hardware coverage.

BofA analyst Tai Liani weighed in positively on the results.

“We believe Cisco’s commentary and results are positive overall, but there are parts that are less than ideal, partially due to tough comps,” Liani wrote in a note.

By Senad Karaahmetovic

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