Yahoo Finance Cisco (CSCO) to Report Q3 Earnings: What Awaits the Stock?
Cisco Systems, Inc. CSCO is scheduled to release third-quarter fiscal 2021 results on May 19.
The company anticipates third-quarter fiscal 2021 revenues to improve in the range of 3.5% to 5.5% on a year-over-year basis. The Zacks Consensus Estimate for revenues is pegged at $12.58 billion, indicating an improvement of almost 5% over the year-ago reported figure.
Non-GAAP earnings are anticipated between 80 cents and 82 cents per share. The Zacks Consensus Estimate for earnings has been stable in the past 30 days at 82 cents per share. The figure suggests growth of 3.8% from the prior-year quarter.
Factors Likely to Have Influenced Q3 Results
Cisco’s fiscal third-quarter results are likely to reflect solid momentum in web security, unified threat, and network security and advanced threat offerings, courtesy of spending on cybersecurity as employees work remotely and surge in Internet traffic.
Further, solid uptick in cloud-based solutions, including Duo and Umbrella, bodes well. The company’s differentiated end-to-end approach across the network, cloud and endpoints is expected to have helped it in expanding clientele.
Meanwhile, robust implementation of latest SecureX offering — a comprehensive cloud-based security platform — to strengthen enterprise security infrastructure with unified visibility, automation and security capabilities across network endpoints, applications, and the cloud, might have contributed to the to-be-reported quarter’s performance.
Besides, incremental adoption of Secure Remote Worker, which leverages Zero Trust Architecture, combined with robust endpoint security portfolio of AnyConnect, Umbrella, Duo and AMP for Endpoints, may have favored the performance in the quarter under review.
Likewise, growing clout of Webex Meetings, Webex Devices and Webex Teams, triggered by coronavirus crisis induced work-from-home wave and demand for telehealth services, is expected to have contributed to the fiscal third-quarter performance. Moreover, the transformation of free trials into paid subscriptions might have acted as a tailwind.
Moreover, momentum across new offerings, including Webex Room Navigator that expedites return to office solutions and Webex Legislate aimed at supporting vital functions of global governments, is expected to have remained a tailwind.
Strength in portfolio and expanding clientele is instilling investors' optimism in the company's stock. On a year-to-date basis, shares of Cisco have returned 17.3%, compared with the industry's rally of 15.9%.
Additionally, integration of advanced AI and ML (or machine learning) capabilities is expected to have bolstered engagement and driven adoption. This, in turn, may get reflected in the to-be-reported quarter’s results.
Also, the company is expected to have gained from the roll out of Wide Area Networking (WAN) edge platform to enable organizations to swiftly migrate to cloud. Notably, the WAN edge platform will provide improved connectivity for cloud and edge applications, and datacenter applications.
In Infrastructure Platforms domain, strength in company’s Catalyst 9000 and Nexus 9000 switch solutions might have driven growth in infrastructure domain. Accelerated deployment of 5G and growing adoption of Wi-Fi 6 compliant devices may have bolstered demand for Meraki solutions in the quarter to be reported.
Nevertheless, increasing investments on portfolio expansion, product enhancements and acquisitions amid stiff competition from Arista ANET and Juniper in networking infrastructure market may have hindered margin expansion in the fiscal third quarter on pricing headwinds.
Markedly, non-GAAP gross margin is expected to be 65-66%, while the reported figure in fiscal second quarter was 66.9%.
Moreover, coronavirus pandemic induced broader macroeconomic weakness across small and medium sized businesses and decline in IT spending might have weighed on the fiscal third-quarter performance.
Important Acquisition Deals in Q3
During the fiscal third quarter, Cisco announced the completion of acquisition of Acacia Communications for $4.5 billion. The company aims to expand optical systems portfolio, especially coherent optical solutions to support its “Internet for the Future” strategy with Acacia buyout.
The company also concluded the buyout of U.K.-based IMImobile PLC for $730 million. The acquisition is aimed at bolstering its Customer Experience as a Service (CXaaS) offerings.
What the Zacks Model Unveils
Our proven model predicts an earnings beat for Cisco this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
Cisco has an Earnings ESP of +0.52% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Other Stocks that Warrant a Look
Here are some other stocks worth keeping a tab on, as our model shows that these too have the right combination of elements to beat on earnings this reporting cycle:
Pure Storage PSTG has an Earnings ESP of +10.81% and a Zacks Rank of 2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
NVIDIA NVDA has an Earnings ESP of +2.11% and a Zacks Rank #2 currently.
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