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Here's What to Expect from Cisco's (CSCO) Quarterly Earnings

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Cisco (CSCO - Free Report) saw its stock price slip 1.10% during regular trading hours Tuesday in a sign that investors might have cold feet about the tech power’s quarterly financial results due out after the closing bell Wednesday.

Overview

Cisco posted strong fiscal fourth-quarter results to help cap a solid year. The company has also completed four acquisitions during the current calendar year, which includes a $2.35 billion purchase of Duo Security that was completed in early October. “Security continues to be our customers number one concern and it is a top priority for us,” CEO Chuck Robbins told analysts on Cisco’s Q4 earnings call.

Cisco is not alone, as the likes of IBM (IBM - Free Report) , Microsoft (MSFT - Free Report) , Adobe (ADBE - Free Report) , and others have all spent billions on acquisitions recently. Shares of CSCO have surged roughly 32% over the last year. Cisco stock closed regular trading Tuesday at $45.12 per share, down around 8% from its 52-week high of $49.47.

 

Q1 Outlook

Cisco is projected to see its fiscal first quarter revenues jump 6.1% to hit $12.87 billion, based on our current Zacks Consensus Estimate. Meanwhile, Cisco’s biggest unit, infrastructure platforms, is expected to climb roughly 6.4% from $6.97 billion in the year-ago period to reach $7.416 billion, based on our NFM estimates. The company’s security business is expected to expand by 11.4% from $585 million to $651.83 million.

At the other end of the income statement, Cisco is projected to see its adjusted quarterly earnings surge 18.03% to reach $0.72 per share. Yet, we still need to know how likely it is that the company is able to top our quarterly earnings estimates.

Luckily, we can turn to our exclusive Earnings ESP figure to do so. The Zacks Earnings ESP (Expected Surprise Prediction) compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change.

This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

Cisco is currently a Zacks Rank #3 (Hold) and rocks an Earnings ESP of 0.0%. Unfortunately, this means our model is inconclusive. But the company has a strong earnings history that includes four straight quarterly beats. 

Cisco is scheduled to release its fiscal Q1 financial results after the closing bell Wednesday.

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