Cisco Systems Inc. (Nasdaq: CSCO) investors are hoping to get some love from Cisco this Valentine’s Day if the company can repeat last quarter’s impressive earnings beat on Feb. 14.
Wall Street analysts are expecting Cisco to get a huge boost from tax reform and demonstrate that its transition to a more software-centric business model is starting to make a meaningful impact on its growth numbers.
Analysts are projecting Cisco will report earnings per share of 59 cents on revenue of $11.8 billion. Those consensus estimates would represent 3.5 percent and 1.9 percent growth, respectively. Last quarter, Cisco guided for second-quarter revenue growth of between 1 and 3 percent, its first quarterly revenue growth in eight quarters.
Investors and analysts are optimistic Cisco can continue its momentum in 2018, and the stock has more than doubled the return of the Standard & Poor’s 500 index in the past six months.
Goldman Sachs analyst Rod Hall says Cisco will be one of the largest under-the-radar winners of tax reform. Hall said Cisco, Microsoft Corp. (MSFT) and Apple (AAPL) will get the biggest overall boost from repatriated cash.
“We expect management to prioritize share repurchases and M&A with the repatriated cash,” Hall says. “We see 2018 as a turning point for Cisco as the company moves to grow both revenue and gross profits as the transition to a disaggregated hardware/software model in campus switching gets underway.”
GBH Insights head of technology research Daniel Ives anticipates a modest beat from Cisco on Wednesday. Ives says Cisco’s January quarter will be “good enough” to please the market, but guidance will be the key.
“While the company has clear challenges given secular headwinds in its traditional sweet spot of switching/routing, we believe Cisco is slowly putting together newer growth engines (e.g. security, SaaS model, Cisco ONE, cloud initiatives) to help lay the groundwork for a stronger bookings growth trajectory in [fiscal 2018 and 2019],” Ives says.
GBH has…
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