Cisco Earnings Preview: What Bank Of America, Morgan Stanley & Goldman Sachs Think

After the market close Wednesday Cisco CSCO will report Q2 2014 earnings. The company is expected to earn $0.53 on revenue of $12.14B. Year-to-date Cisco shares are up roughly 14 percent.

Cisco CAPEX spending has remained stable and healthy, helping the company to invest in projects such as Nexus 9000 and ACI software. Morgan Stanley MS is expecting the “good early response” to Nexus 9000 and ACI to be the “key to tamping down investor concern” around potential SDN (software-defined networking) and NFV (network functions virtualization) disruptions.

Bank of America BAC analyst James Faucette stated he believes the launch of ACI software will “tap into a substantial size installed-base of legacy data center switches and also address the growing need for SDN solutions”. 

Scott Kessler of Capital IQ is not as rosy about Cisco’s new products dampening fears. Kessler believes “product transition issues and pricing pressure” will continue to plague the firm for “the next several quarters”. Kessler also made sure to note that Capital IQ believes “EPS has been and will continue to be aided by notable share repurchase activity," something Goldman Sachs GS pontificated upon in June.

Cisco’s earnings stand to benefit tonight from a positive P/E ratio impact in light of share repurchases. A better spending environment could also provide a lift for demand of Cisco products. BOA/ML sees a recovering Public segment market (which accounts for roughly 20 percent of Cisco revenues) will experience positive normal seasonality in the near-term helping guidance.

All three analysts see Cisco’s recent inability to react to demand for SDN and NFV as negative; however, Cisco's positioning in the market has the potential to enable the firm to capitalize off new product deployments alongside the possibility of mergers and acquisitions.

All things considered, traders and investors can expect Cisco to continue to be cautiously optimistic about products, competitive positions, and business development.

With 90 minutes left until the close of trading on Wednesday, Cisco shares are down 0.54 percent to $25.01.