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Cisco (CSCO) Up 3% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Cisco Systems (CSCO - Free Report) . Shares have added about 3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cisco due for a pullback? 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 drivers.
Cisco's Q4 Earnings Top Estimates, Revenues Up Y/Y
Cisco Systems reported fourth-quarter fiscal 2023 non-GAAP earnings of $1.14 per share, which beat the Zacks Consensus Estimate by 7.55%. The bottom line jumped 37.3% year over year.
Revenues increased 16% year over year to $15.2 billion and beat the consensus mark by 1.04%. Product revenues (76.6% of total revenues) increased 20.3% on a year-over-year basis to $11.09 billion.
Secure, Agile Networks revenues rose 33% year over year to $8.125 billion, beating the consensus mark by 5.85%. End-to-End Security revenues were $987 million, which missed the Zacks Consensus Estimate by 3.04%.
Internet for the Future revenues increased 3% to $1.298 billion, missing the consensus mark by 9.29%. Optimized Application Experiences revenues were up 15% to $214 million and beat the consensus mark by 2.43%.
Collaboration revenues decreased 12% on a year-over-year basis to $1.023 billion. Revenues from Other Products decreased 33% to $2 million.
Service revenues (23.4% of total revenues) inched up 4.1% year over year to $3.55 billion.
Quarter in Detail
Region-wise, America’s revenues increased 12% year over year to $9.075 billion and beat the consensus mark by 4.34%. EMEA revenues increased 10% from the year-ago quarter to $3.93 billion but lagged the consensus mark by 2.9%. APJC revenues increased 7% year over year to $2.203 billion but missed the consensus mark by 2.59%
Annualized recurring revenues came in at $24.3 billion, up 5% year over year. Product ARR increased 10% year over year.
Non-GAAP gross margin expanded 270 basis points (bps) from the year-ago quarter’s level to 65.9%.
On a non-GAAP basis, the product gross margin expanded 420 bps to 65.5%. Service gross margin contracted 150 bps to 67.5%.
Non-GAAP operating expenses were $4.65 billion, up 14.7% year over year. As a percentage of revenues, operating expenses decreased 40 bps year over year to 30.6%.
Non-GAAP operating margin expanded 300 bps year over year to 35.4%.
Balance Sheet and Cash Flow
As of Jul 29, 2023, Cisco’s cash & cash equivalents and investments balance were $26.15 billion compared with $23.29 billion as of Apr 29, 2023.
Total debt (short-term plus long-term) as of Jul 29, 2023, was $8.39 billion, unchanged sequentially.
Cash flow from operating activities was $6 billion, higher than the $5.2 billion reported in the previous quarter.
The remaining performance obligations (“RPO”) at the end of the fiscal fourth quarter were $34.9 billion, up 11%, with 51% of this amount to be recognized as revenues over the next 12 months. Product RPO was up 12% and service RPO was up 9%.
Guidance
For first-quarter fiscal 2024, revenues are expected to be between $14.5 billion and $14.7 billion.
Non-GAAP gross margin is anticipated between 64.5% and 65.5% for the quarter. Non-GAAP operating margin is expected between 34% and 35% for the quarter.
Non-GAAP earnings are anticipated between $1.02 and $1.04 per share.
For fiscal 2024, revenues are expected between $57 billion and $58.2 billion. Non-GAAP earnings are anticipated between $4.01 and $4.08 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, Cisco has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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 looks promising. 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) Up 3% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Cisco Systems (CSCO - Free Report) . Shares have added about 3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cisco due for a pullback? 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 drivers.
Cisco's Q4 Earnings Top Estimates, Revenues Up Y/Y
Cisco Systems reported fourth-quarter fiscal 2023 non-GAAP earnings of $1.14 per share, which beat the Zacks Consensus Estimate by 7.55%. The bottom line jumped 37.3% year over year.
Revenues increased 16% year over year to $15.2 billion and beat the consensus mark by 1.04%. Product revenues (76.6% of total revenues) increased 20.3% on a year-over-year basis to $11.09 billion.
Secure, Agile Networks revenues rose 33% year over year to $8.125 billion, beating the consensus mark by 5.85%. End-to-End Security revenues were $987 million, which missed the Zacks Consensus Estimate by 3.04%.
Internet for the Future revenues increased 3% to $1.298 billion, missing the consensus mark by 9.29%. Optimized Application Experiences revenues were up 15% to $214 million and beat the consensus mark by 2.43%.
Collaboration revenues decreased 12% on a year-over-year basis to $1.023 billion. Revenues from Other Products decreased 33% to $2 million.
Service revenues (23.4% of total revenues) inched up 4.1% year over year to $3.55 billion.
Quarter in Detail
Region-wise, America’s revenues increased 12% year over year to $9.075 billion and beat the consensus mark by 4.34%. EMEA revenues increased 10% from the year-ago quarter to $3.93 billion but lagged the consensus mark by 2.9%. APJC revenues increased 7% year over year to $2.203 billion but missed the consensus mark by 2.59%
Annualized recurring revenues came in at $24.3 billion, up 5% year over year. Product ARR increased 10% year over year.
Non-GAAP gross margin expanded 270 basis points (bps) from the year-ago quarter’s level to 65.9%.
On a non-GAAP basis, the product gross margin expanded 420 bps to 65.5%. Service gross margin contracted 150 bps to 67.5%.
Non-GAAP operating expenses were $4.65 billion, up 14.7% year over year. As a percentage of revenues, operating expenses decreased 40 bps year over year to 30.6%.
Non-GAAP operating margin expanded 300 bps year over year to 35.4%.
Balance Sheet and Cash Flow
As of Jul 29, 2023, Cisco’s cash & cash equivalents and investments balance were $26.15 billion compared with $23.29 billion as of Apr 29, 2023.
Total debt (short-term plus long-term) as of Jul 29, 2023, was $8.39 billion, unchanged sequentially.
Cash flow from operating activities was $6 billion, higher than the $5.2 billion reported in the previous quarter.
The remaining performance obligations (“RPO”) at the end of the fiscal fourth quarter were $34.9 billion, up 11%, with 51% of this amount to be recognized as revenues over the next 12 months. Product RPO was up 12% and service RPO was up 9%.
Guidance
For first-quarter fiscal 2024, revenues are expected to be between $14.5 billion and $14.7 billion.
Non-GAAP gross margin is anticipated between 64.5% and 65.5% for the quarter. Non-GAAP operating margin is expected between 34% and 35% for the quarter.
Non-GAAP earnings are anticipated between $1.02 and $1.04 per share.
For fiscal 2024, revenues are expected between $57 billion and $58.2 billion. Non-GAAP earnings are anticipated between $4.01 and $4.08 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, Cisco has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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 looks promising. Notably, Cisco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.