Cisco Beats Third Quarter Earnings Estimates and Issues Upbeat Fourth Quarter View

Cisco Beats Third Quarter Earnings Estimates and Issues Upbeat Fourth Quarter View
May 15, 2020

 

Routers, wireless, and security systems manufacturer Cisco Systems Inc (Nasdaq: CSCO) reported its fiscal 2020 third-quarter profit that declined from the comparable period last year. However, both earnings and revenues beat analysts’ estimates. The networking solution provider’s fourth-quarter guidance also surpassed analysts’ anticipations. Following the release of third-quarter results, the stock closed at $43.85, an increase of $1.90 or 4.53% from the prior close.

The San Jose, California-based company reported Q3 revenue of $11.983 billion, down 7.6% from $12.958 billion in the similar period last year. In the earlier quarter, revenue fell 4% on a y-o-y basis.

For the quarter ended April 25th, 2020, Cisco posted a net profit of $2.774 billion, or $0.65 per share, compared with a net profit of $3.044 billion, or $0.69 a share, in the year-ago period. Excluding charges, non-GAAP earnings declined to $3.368 billion, or $0.79 per share in Q3 2020, from $3.454 billion, or $0.78 a share in Q3 2019. Analysts surveyed by Refinitiv had anticipated the company to post earnings of $0.69 per share on revenues of $11.70 billion for the quarter.

Segment-wise,

  • Infrastructure platforms (includes routers and switchers for corporate data centers) posted revenues of $6.429 billion, down 15% on a y-o-y basis. Analysts surveyed by FactSet had anticipated the company to post revenues of $6.83 billion. Cisco’s finance chief Kelly Kramer stated that the pace of products declined in April.
  • Applications (includes Webex video-calling service) revenue decreased 5% y-o-y to $1.363 billion and missed FactSet Consensus estimates of $1.43 billion.
  • Security revenue was $776 million, up 6% from the prior-year period.

CEO Chuck Robbins highlighted that the company has “added many new prospects through free WebEx trials that we anticipate converting to revenue in the future.” He disclosed that in April Webex meeting recorded more than 500 million participants.

With regard to the outlook, Cisco stated that it anticipates Q4 adjusted earnings of between $0.72 and $0.74 per share. The company also expects Q4 revenue to decline in the range of 8.5% to 11.5%. Analysts surveyed by Refinitiv anticipate Cisco to report Q4 adjusted earnings of $0.69 per share on revenues of $11.82 billion, mirroring a 12% decrease.

Following the issue of guidance, the CEO pointed out that business from enterprises operating large data centers could continue to grow: “I guess the good news is that the success we’ve seen in the webscale space the last two quarters hasn’t even seen the impact of the 8000 [router line] yet, so it’s in trials in lots of customers still. They have very extended evaluation periods before they deploy, but I will tell you it’s doing incredibly well in those trials.”

During the third quarter, the company had stated that it would permit deferrals of payments on fresh orders to assist clients whose finances have been negatively impacted by the coronavirus outbreak. Cisco had also revealed that it intends to take over wireless backhaul enterprise Fluidmesh Networks.

The quarterly earnings beat and the upbeat outlook are expected to keep the stock of Cisco bullish in the days ahead.

The historical price chart indicates that the stock has closed above its 50-day moving average after receiving support at 40. The next resistance is anticipated only near 50. Additionally, the stochastic indicator is also rising towards the bullish zone. Therefore, we are expecting the stock to rally in the short-term.

csc - technical analysis - 15th May 2020

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Janine

Janine

Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be


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