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How Analysts Are Treating Cisco After Earnings and Guidance

Cisco Systems Inc. (NASDAQ: CSCO) reported its fiscal first-quarter earnings after the markets closed on Thursday, but despite beating estimates on both the top and bottom lines, this networking equipment and services giant still fell. As a result, a few key analysts decided to weigh in on the company and what could have possibly gone wrong.

The company had $0.59 in earnings per share (EPS) on $12.68 billion in revenue, compared to consensus estimates from Thomson Reuters of $0.56 in EPS on revenue of $12.65 billion. This quarterly report also compared to EPS of $0.54 and $12.24 billion in revenue reported in the same quarter in 2014. Deferred revenue was $15.2 billion, up 10% in total.

Merrill Lynch reiterated a Buy rating for Cisco with a $30 price objective, implying upside of nearly 13% from the current price level. The firm noted that revenues were in line, while EPS beat on strong gross margins and cost discipline, yet second-quarter revenue guidance was weak at 1% year over year, versus the firm’s 5%. Merrill Lynch further detailed in its report:

While global markets continue to be challenged, we think Cisco has a solid strategy, with a well-managed portfolio that addresses appropriate growth areas. Management expects growth to accelerate in the second half of 2016 as security returns to double digit growth, headwinds related to the transition from legacy to new switches diminishes, and revenues from acquisitions and...


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