Cisco (CSCO) is scheduled to report results of its fiscal third quarter after the market closes on May 18 with a conference call scheduled for 4:30 pm ET. What to watch for:
GUIDANCE: Along with its last report, Cisco guided for Q3 adjusted earnings per share of 85c-87c on revenue growth of 3%-5%. At the time, analysts were expecting the company to report Q3 EPS of 86c on revenue of $13.25B, but Wall Street now expects Cisco to report Q3 EPS of 86c and revenue of $13.34B.
CAPITAL RETURNS: In addition, Cisco announced in its last quarterly report that it raised its quarterly dividend 3% to 38c per common shares. The company also announced an additional $15B share repurchase program. At the time, the remaining authorized amount for stock repurchases including the additional authorization was approximately $18B.
MORGAN STANLEY: In mid-April, Morgan Stanley analyst Meta Marshall lowered the firm's price target on Cisco to $59 from $61 and kept an Equal Weight rating on the shares while lowering her industry view on Telecom & Networking Equipment to Cautious from In-Line. Though she still expects equipment and storage companies to "sound good" on calendar Q1 earnings call given their backlog, she is now starting to see signs of weakness accumulate, including a more cautious flash survey on hardware and reseller checks pointing to softer second half pipelines, the analyst told investors.
CITI: Also in April, Citi analyst Jim Suva downgraded Cisco to Sell from Neutral with a price target of $45, down from $65. The analyst said that while supply chain constraints are well known, he did not foresee two events occurring: the large increase in first responder technology advancements and security with funding needs being met by state and local governments, and the recent war in Ukraine spurring a large increase in defense spending around the globe. As these share shifts evolve, Cisco's valuation multiple will see compression, Suva said at the time. The analyst also believes that Arista Networks (ANET) has shifted its supply chain to be more proactive with orders, which will lead to more share gains against Cisco.
WELLS FARGO: In mid-March, Wells Fargo analyst Aaron Rakers downgraded Cisco to Equal Weight from Overweight with a price target of $65, down from $70. The analyst said at the time that he thinks shares could remain more range bound given an expectation that shares could see limited multiple expansion from current levels as investors focus on peaking backlog/product order growth dynamics, Cisco's subscription model transformation that is a well-known/modeled consideration, and increasing competition in core enterprise campus switching.
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