Cisco Falls Despite Q2 Beat, Increased Dividend

Cisco CSCO has a new trend on Wall Street: investors flee whether they beat consensus or not. This happened during the company's fiscal first quarter when Cisco reported a Q1 EPS of $0.53 versus the Street estimate of $0.51. Now it has happened again today. "Cisco guided pretty conservatively, so everyone's assuming that the company is not necessarily as bad as feared," Pacific Crest analyst Brent Bracelin told Benzinga before the market close. "I think there's a lot of debate around that, just given the weakness we've seen in emerging markets." Bracelin said that he expects the slowdown in emerging markets to be a "multi-quarter headwind." But he didn't detect a lot of risk going into today's earnings. "For a stock that is a value-oriented stock (it's paying a dividend), I don't see a lot of downside risk," he added. Cisco reported a Q2 EPS of $0.47 -- $0.01 above the Street estimate of $0.46. Earnings per share were down eight percent from the year-ago quarter, which might have been one of the things that disappointed investors. Revenue arrived at $11.2 billion, beating the Street estimate of $11.03 billion by a small amount. Sales were down seven percent year-over-year. Cisco raised its quarterly dividend from $0.17 to $0.19 per share. The company also announced that it expects its third quarter sales to decline by six to eight percent. "Things are challenged, [but] this is probably as bad as it gets," Bracelin added. Cisco's Q3 EPS is currently expected to fall within the $0.47 to $0.49 range, which is nearly inline with the Street's estimate of $0.48. The company is forecasting a FY2014 EPS between $1.95 and $2.05 versus the Street estimate of $1.98. Ups And Downs Cisco has had its share of ups and downs over the last few years, but the stock looked good for the first half of 2013. Things stayed pretty quiet during the winter and spring months, but Cisco jumped more than 12 percent on May 16. The stock continued to move ahead and rose another 10 percent over the next three months. After that, Cisco began to decline, falling more than 11 percent by the end of the month. There were signs of growth in September, but by October 9 the company had lost another three percent. In November, investors were encouraged by what appeared to be a new upward trend. Between November 4 and November 11, Cisco gained another six percent. Those gains were short-lived, however. On November 14, the stock plummeted nearly 11 percent. It is not quite clear if Cisco will continue heading south or if it will finally enjoy a sustainable growth spurt. There were signs of hope in December (the stock jumped 10.8 percent between December 13 and December 31). Cisco continued to rise in January 2014 but took a dive at the end of the month. Cisco is currently down more than four percent in after hours trading. Verdict: Cisco Might Struggle To Impress Investors Quarter after quarter, investors remain skeptical of Cisco's future, regardless of its performance. Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.