Cisco Reports Earnings Wednesday. Heres What to Expect. – Barron’s

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Cisco Systems will be one of the first technology companies to report earnings that include results from April, the first month to take the full brunt of the Covd-19 triggered economic downturn.

Cisco (ticker: CSCO) reports numbers on Wednesday after the market closes. It scheduled an earnings conference call for 4:30 p.m. Eastern time.

In February, when the virus outbreak was viewed by the tech sector mostly as an Asian supply-chain and China-demand issue, Cisco projected revenue would be down 1.5% to 3.5% for its fiscal third quarter ending in April on a year-over-year basis. That implied a range of $12.5 billion to $12.8 billion, with profit of 79 cents to 81 cents a share.

But no one on the Street thinks the original guidance is achievable. For the quarter, the current Street consensus calls for the networking hardware and software company to report revenue of $11.88 billion and profit of 71 cents a share. For the current quarter ending in July, the Street is projecting $12.07 billion and 71 cents a share.

The core tension in the quarter will be the balance between a boost in demand for home networking and cloud-computing gear against softness in enterprise spending.

RBC Capital analyst Robert Muller writes in a research note that Ciscos quarter is likely to be a mixed bag. We view consensus expectations as reasonable, however a wide-range of outcomes [and] guidance are possible given the uncertainty surrounding Covid-19.

Muller says he expects near-term sales declines in the companys corporate-campus-network business as we expect the macro uncertainty will have companies exercise caution with spending plans. But he also contends that Cisco could benefit (relatively speaking) if the caution drives customers to the tried-and-tested offerings of Cisco, which can offer a full suite of networking solutions. Muller maintains his Outperform rating and $47 price target.

Evercore ISI analyst Amit Daryanani on Monday is maintaining his Outperform rating and $50 target, but trims his estimates based on cautious recent comments from rivals Juniper (JNPR) and Arista Networks (ANET) on both supply constraints and incremental softness in enterprise spending. Despite near term challenges, we think there are tailwinds driven by the shift to remote working such as increased spend on networking to expand capacity plus increased demand for security and collaboration solutions, he writes. We remain positive on Cisco stock as we think the company is well-positioned to navigate through the current downturn.

Barclays analyst Tim Long likewise maintains an Overweight rating and $48 target on Cisco, but notes that his estimates for the current quarter are far below consensus at $11.4 billion and 63 cents a share. Our recent estimate revisions have largely been in view of the increasingly severe disruption to enterprise activity related to Covid-19, Long writes. However, we see some drivers which may partially offset Covid-19 headwinds. These include recent management commentary around firms extending physical appliances to the work-from-home (WFH) environment, indications that firms including Barclays itself have been investing in upgrading their Cisco plant to facilitate expanded connectivity requirements, and pre-existing product refresh cyclesthat should be supportive for Cisco longer-term and provide some offset to near-term macro pressures as well.

On Monday, the stock rose 1.3% to $43.54, while the Dow Jones Industrial Average fell 0.5%. For the year the shares are down 9.7%.

Write to Eric J. Savitz at eric.savitz@barrons.com

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Cisco Reports Earnings Wednesday. Heres What to Expect. - Barron's