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Cisco (CSCO) Stock Up Ahead of Earnings: What to Expect

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Cisco Systems (CSCO - Free Report) shares have been on a tear since Christmas, along with much of the market and other tech giants like Facebook (FB - Free Report) and Amazon (AMZN - Free Report) . CSCO stock closed regular trading up 0.65% in a sign that investors might expect good things from the networking giant’s fiscal second-quarter financial results that are due out after the closing bell Wednesday.

Quick Overview

Cisco’s core infrastructure platforms business is comprised of networking equipment like routers and switches. The historic tech company also operates two other larger division, applications and security, which have been growth drivers in recent years. These businesses include offerings like AppDynamics software and its recent purchase of Duo Security for $2.35 billion.

The company is coming off a fiscal first-quarter that saw its revenues jump 8% to reach $13.1 billion, which topped Wall Street estimates. More specifically, Cisco’s application business surged 18% and security climbed 11%. CSCO also saw its adjusted earnings per share jump 23% to beat estimates.

But investors should note that Morgan Stanley analyst James Faucette on Tuesday downgraded Cisco to “equal-weight” from “overweight” and lowered his price target to $49 from $51 a share. Despite the downgrade, shares of CSCO popped 0.65% during regular trading hours to reach $47.89 a share and rest just below their 52-week high of $49.47.

Shares of Cisco have soared 19% since Christmas to outpace the S&P 500’s roughly 16% climb. CSCO stock has climbed 16% over the last year to beat its peer group’s 3.5% average expansion, which includes NetGear (NTGR - Free Report) , Extreme Networks (EXTR - Free Report) , and others. Cisco has also performed well over the last five years, outpacing Google (GOOGL - Free Report) and is now nearly neck-and-neck with Apple (AAPL - Free Report) after the iPhone giant's recent downturn.

 

Outlook

Cisco management initially called for its second quarter 2019 revenues to climb between 5% and 7% and its EPS to come in the $0.71 to $0.73 a share range. With that said, our current Zacks Consensus Estimate calls for Cisco’s Q2 revenues to pop 4.3% to reach $12.40 billion.

At the bottom end of the income statement, Cisco’s adjusted quarterly earnings are projected to surge 14.3% to reach $0.72 a share. Investors should also note that the company’s earnings estimate revision trends have trended completely in the right direction recently. 

Cisco is currently a Zacks Rank #3 (Hold) and sports an “A” grade for Growth and a “B” for Momentum in our Style Scores system. The company is scheduled to release its Q2 fiscal 2019 financial results after the closing bell on Wednesday, February 13. So, make sure to come back to Zacks for a full breakdown of the company’s actual metrics.

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