Analysts Comment on Cisco Ahead of Earnings

reports third quarter results on May 14 after the market-close. Analysts estimate third quarter EPS of $0.48 and revenue of $11.38 billion. The company's earnings conference call is expected to start at 4:30 p.m. (ET).

SunTrust analyst Inder Singh initiated coverage on Cisco with a Buy rating and $27.00 price target in a report published Saturday. Singh sees the company's product refresh will drive growth next year and leverage from recent cost reductions. SunTrust emphasized that fear over software defined network (SDN) collapsing Cisco's core business in “overhyped & unrealistic.” The analyst wrote, “Some Cisco bears have used aggressive assumptions to suggest the imminent collapse of switching. We think this is more hype than reality, as Cisco has shown an uncanny ability to navigate such transitions, and exploit them to its advantage. We believe Cisco will do so again. The probable impact from SDN in next the few years is ~5% on DC switching. To us this does not seem quite like a doomsday scenario.” Wunderlich Securities analyst Mathew Robison reported that Cisco has set low expectations for the quarter, with revenue not expected to reach $11.6 billion from two years ago. The analyst expects a decline for overall Routing, Switching, Collaboration, and Service Provider Video. Robison commented, “so book/bill of more than one should not be a surprise, even though it is usually one or less in the April quarter. We expect Unified Computing System (UCS) to be highlighted as a growth segment, along with cloud-type businesses and early adopter activity for the Nexus 9000 switch. We also expect commentary on the initial ramp in volume for NCS and CRS-X routers and progress with security/SourceFire.” Wunderlich downgraded shares of Cisco on April 8 from Buy to Hold and lowered the price target from $25.00 to $24.00. On Thursday, Brian Modoff from Deutsche Bank maintained a Hold rating on Cisco. In his earnings preview, the analyst noted the “lack of clarity on Cisco's FY15/16 revenue capture potential in new product cycle ramps around 10/40GE datacenter switching, next-gen 100GE routing, next-gen security platforms, Cloud IT services, etc.” Deutsche Bank expects revenue for the April quarter to come in at $11.46 billion versus consensus of $11.35 billion. For July, the analyst expects $12.03 billion in revenue and EPS of $0.53 versus consensus of $11.79 billion and $0.51, respectively. Modoff anticipates better-than-expected datacenter switching, security, UCS, and wireless execution. The analyst expects weakness in emerging markets and from carrier routing softness. Standpoint's Ronnie Moas downgraded shares of Cisco on April 22 from Buy to Hold.