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Cisco (CSCO) Down 12.3% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Cisco Systems (CSCO - Free Report) . Shares have lost about 12.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Cisco due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Cisco's Q4 Earnings Miss Estimates, Revenues Flat Y/Y
Cisco Systems reported fourth-quarter fiscal 2022 non-GAAP earnings of 83 cents per share, which lagged the Zacks Consensus Estimate by 27.38%. The bottom line decreased 1.2% year over year.
Revenues were almost unchanged year over year at $13.10 billion. Revenues beat the consensus mark by 2.75%.
Quarter in Detail
Region-wise, the Americas revenues decreased 3% year over year to $7.47 billion. EMEA revenues increased 8% from the year-ago quarter to $3.58 billion. APJC revenues decreased 2% year over year to $2.06 billion.
Service revenues (26.1% of total revenues) were unchanged year over year at $3.41 billion.
Annualized recurring revenues (“ARR”) came in at $22.9 billion, up 8% year over year.
Product revenues (73.6% of total revenues) decreased 0.3% on a year-over-year basis to $9.69 billion.
Break Down of Product Revenues
Secure, Agile Networks (62.9% of total Product revenues) revenues decreased 1% year over year to $6.09 billion.
Collaboration (12% of Product revenues) revenues increased 2% on a year-over-year basis to $1.16 billion.
End-to-End Security (10.2% of Product revenues) revenues were up 20% to $984 million.
Internet for the Future (13% of Product revenues) revenues decreased 10% to $1.26 billion.
Optimized Application Experiences (1.9% of Product revenues) revenues were up 8% to $185 million.
Revenues from Other Products decreased 22% to $3 million.
Operating Details
Non-GAAP gross margin contracted 270 basis points (bps) from the year-ago quarter’s level to 62.9%.
On a non-GAAP basis, product gross margin contracted 370 bps to 61.3%. Service gross margin remained unchanged at 61.3%.
Non-GAAP operating expenses were $4.59 billion, up 8.9% year over year. As a percentage of revenues, operating expenses expanded 290 bps to 35%.
Non-GAAP operating margin expanded 20 bps year over year to 32.4%.
Balance Sheet and Cash Flow
As of Jul 30, 2022, Cisco’s cash & cash equivalents and investments balance were $19.3 billion compared with $20.1 billion as of Apr 30, 2022.
Total debt (short-term plus long-term) as of Jul 30, 2022, was $9.52 billion compared with $9.42 billion as of Apr 30, 2022.
Cash flow from operating activities was $3.7 billion, unchanged from the previous quarter.
Cisco paid a quarterly dividend of 38 cents per share and returned $2.4 billion to shareholders through buybacks.
Remaining performance obligations (“RPO”) at the end of the fiscal fourth quarter were $31.5 billion, up 2%, with 54% of this amount to be recognized as revenues over the next 12 months. Product RPO was up 6% and service RPO was down 1%.
Guidance
For first-quarter fiscal 2023, revenues are expected to grow between 2% and 4% on a year-over-year basis.
Non-GAAP gross margin is anticipated between 63% and 64% for the quarter.
Non-GAAP operating margin is anticipated between 31.5% and 32.5% for the quarter. Non-GAAP earnings are anticipated between 82 cents and 84 cents per share.
For fiscal 2023, revenues are expected to rise by 4-6% on a year-over-year basis. Non-GAAP earnings are anticipated between $3.49 and $3.56 per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
At this time, Cisco has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Cisco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Cisco (CSCO) Down 12.3% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Cisco Systems (CSCO - Free Report) . Shares have lost about 12.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Cisco due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Cisco's Q4 Earnings Miss Estimates, Revenues Flat Y/Y
Cisco Systems reported fourth-quarter fiscal 2022 non-GAAP earnings of 83 cents per share, which lagged the Zacks Consensus Estimate by 27.38%. The bottom line decreased 1.2% year over year.
Revenues were almost unchanged year over year at $13.10 billion. Revenues beat the consensus mark by 2.75%.
Quarter in Detail
Region-wise, the Americas revenues decreased 3% year over year to $7.47 billion. EMEA revenues increased 8% from the year-ago quarter to $3.58 billion. APJC revenues decreased 2% year over year to $2.06 billion.
Service revenues (26.1% of total revenues) were unchanged year over year at $3.41 billion.
Annualized recurring revenues (“ARR”) came in at $22.9 billion, up 8% year over year.
Product revenues (73.6% of total revenues) decreased 0.3% on a year-over-year basis to $9.69 billion.
Break Down of Product Revenues
Secure, Agile Networks (62.9% of total Product revenues) revenues decreased 1% year over year to $6.09 billion.
Collaboration (12% of Product revenues) revenues increased 2% on a year-over-year basis to $1.16 billion.
End-to-End Security (10.2% of Product revenues) revenues were up 20% to $984 million.
Internet for the Future (13% of Product revenues) revenues decreased 10% to $1.26 billion.
Optimized Application Experiences (1.9% of Product revenues) revenues were up 8% to $185 million.
Revenues from Other Products decreased 22% to $3 million.
Operating Details
Non-GAAP gross margin contracted 270 basis points (bps) from the year-ago quarter’s level to 62.9%.
On a non-GAAP basis, product gross margin contracted 370 bps to 61.3%. Service gross margin remained unchanged at 61.3%.
Non-GAAP operating expenses were $4.59 billion, up 8.9% year over year. As a percentage of revenues, operating expenses expanded 290 bps to 35%.
Non-GAAP operating margin expanded 20 bps year over year to 32.4%.
Balance Sheet and Cash Flow
As of Jul 30, 2022, Cisco’s cash & cash equivalents and investments balance were $19.3 billion compared with $20.1 billion as of Apr 30, 2022.
Total debt (short-term plus long-term) as of Jul 30, 2022, was $9.52 billion compared with $9.42 billion as of Apr 30, 2022.
Cash flow from operating activities was $3.7 billion, unchanged from the previous quarter.
Cisco paid a quarterly dividend of 38 cents per share and returned $2.4 billion to shareholders through buybacks.
Remaining performance obligations (“RPO”) at the end of the fiscal fourth quarter were $31.5 billion, up 2%, with 54% of this amount to be recognized as revenues over the next 12 months. Product RPO was up 6% and service RPO was down 1%.
Guidance
For first-quarter fiscal 2023, revenues are expected to grow between 2% and 4% on a year-over-year basis.
Non-GAAP gross margin is anticipated between 63% and 64% for the quarter.
Non-GAAP operating margin is anticipated between 31.5% and 32.5% for the quarter. Non-GAAP earnings are anticipated between 82 cents and 84 cents per share.
For fiscal 2023, revenues are expected to rise by 4-6% on a year-over-year basis. Non-GAAP earnings are anticipated between $3.49 and $3.56 per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
At this time, Cisco has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Cisco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.