Earnings Preivew: Cisco Systems

Cisco Systems (CSCO) is expected to report Q2 earnings after the market close on Wednesday, February 3, with a conference call scheduled for 4:30 pm ET.

Guidance

The consensus estimate is 35c for EPS and $9.40B for revenue, according to First Call. Recent analyst chatter suggests Cisco has already signaled that it expects a year-over-year sales increase for the quarter, the first such increase in a year. The company guided to revenue of $9.2B-$9.5B and profit margins that should bring EPS to 32c-35c. Cisco's high profit margin and huge cash hoard let it power through the recession and make a string of acquisitions, but it did lay off about 2,000 employees in the quarter.

Analyst Views

Wedbush believes demand is good and if it weren't for continued supply constraints, the firm would forecast revenue to be at the high end of the range with product contribution above the $7.4M, or 0.8% growth, they estimate. Wedbush believes supply constraints imply positive margin performance associated with mix shift towards higher priced equipment and would not be surprised to see upside to the guidance range for gross margin and bottom line profit. Citigroup concurred saying they expect upside to consensus estimates and above consensus guidance. Cowen was also positive, saying they expect Cisco to report Q2 results at or above their $9.4B/34c estimates. UBS analyst Tuesday wrote, "We believe Cisco shares may edge higher post earnings on a favorable near-term outlook." With analysts forecasting upside to Q2 results, Cisco may have to really knock the cover off the ball to get the crowd excited. Consensus estimates for Q3 and FY10 are 36c/$9.49B and $1.44/$37.84B, respectively.