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Cisco's Long-Term View Disappoints, Revenue Outlook Down

Cisco Systems Inc. CSCO recently provided long-term (3-5 years) growth targets. Management now projects revenues to increase in the range of 1–3%, more or less stable margins and mid-single digit growth in earnings per share (EPS). Moreover, the company expects to return greater than 50% of free cash flow to shareholders.

Uninspiring Outlook Hurts Stock

Over the 3–5 year time frame, Cisco projects Infrastructure Platforms (Switching, NGN routing, Wireless, Data Center) revenues to remain almost flat, while Security, Applications and Services to grow low-mid teens, high-single digits – low teens and mid-single digits, respectively. Other (SP Video hardware) revenues are projected to decline mid-single digits.

Notably, the current top-line growth projections were lower than the company’s previously provided long-term guidance at the end of calendar 2013. Per CRN, the company had then projected revenues to grow 3–6% throughout the next 3–5 years, which was also lower than the original 5–7% long-term outlook it gave in calendar 2012.

Cisco anticipates revenues of $48...


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