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Cisco (CSCO) Up 7.7% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Cisco Systems (CSCO - Free Report) . Shares have added about 7.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cisco due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Cisco Q3 Earnings Top Estimates, Revenues Up Y/Y
Cisco Systems reported third-quarter fiscal 2023 non-GAAP earnings of $1 per share, which beat the Zacks Consensus Estimate by 3.09%. The bottom line increased 15% year over year.
Revenues increased 13.5% year over year to $14.57 billion and beat the consensus mark by 1.27%.
Product revenues (76.1% of total revenues) increased 17.4% on a year-over-year basis to $11.09 billion.
Secure, Agile Networks revenues rose 29% year over year to $7.55 billion. End-to-End Security revenues were up 2% to $958 million. Internet for the Future revenues increased 5% to $1.39 billion. Optimized Application Experiences revenues were up 12% to $204 million. Revenues from Other Products increased 19% to $3 million.
Collaboration revenues decreased 13% on a year-over-year basis to $985 million.
Service revenues (23.9% of total revenues) inched up 2.7% year over year to $3.48 billion.
Quarter in Detail
Region-wise, America’s revenues increased 13% year over year to $8.63 billion. EMEA revenues increased 16% from the year-ago quarter to $3.81 billion. APJC revenues increased 11% year over year to $2.13 billion.
Annualized recurring revenues came in at $23.8 billion, up 6% year over year and product ARR increased 10% year over year.
Non-GAAP gross margin contracted 20 basis points (bps) from the year-ago quarter’s level to 65.2%.
On a non-GAAP basis, the product gross margin expanded 40 bps to 64.5%. Service gross margin contracted 160 bps to 67.3%.
Non-GAAP operating expenses were $4.55 billion, up 15.8% year over year. As a percentage of revenues, operating expenses increased 60 bps year over year to 31.3%.
Non-GAAP operating margin contracted 80 bps year over year to 33.9%.
Balance Sheet and Cash Flow
As of Apr 29, 2023, Cisco’s cash & cash equivalents and investments balance were $23.29 billion compared with $22.05 billion as of Jan 28, 2023.
Total debt (short-term plus long-term) as of Apr 29, 2023, was $8.39 billion compared with $8.89 billion as of Jan 28, 2023.
Cash flow from operating activities was $5.2 billion, higher than the $4.7 billion reported in the previous quarter.
The remaining performance obligations (“RPO”) at the end of the fiscal third quarter were $32.1 billion, up 6%, with 53% of this amount to be recognized as revenues over the next 12 months. Product RPO was up 9% and service RPO was up 4%.
Guidance
For fourth-quarter fiscal 2023, revenues are expected to grow between 14% and 16% on a year-over-year basis.
Non-GAAP gross margin is anticipated between 64.5% and 65.5% for the quarter.
Non-GAAP operating margin is anticipated between 34% and 35% for the quarter. Non-GAAP earnings are anticipated between $1.05 and $1.07 per share.
For fiscal 2023, revenues are expected to rise 10-10.5% on a year-over-year basis. Non-GAAP earnings are anticipated between $3.80 and $3.82 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, Cisco has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Cisco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Cisco (CSCO) Up 7.7% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Cisco Systems (CSCO - Free Report) . Shares have added about 7.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cisco due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Cisco Q3 Earnings Top Estimates, Revenues Up Y/Y
Cisco Systems reported third-quarter fiscal 2023 non-GAAP earnings of $1 per share, which beat the Zacks Consensus Estimate by 3.09%. The bottom line increased 15% year over year.
Revenues increased 13.5% year over year to $14.57 billion and beat the consensus mark by 1.27%.
Product revenues (76.1% of total revenues) increased 17.4% on a year-over-year basis to $11.09 billion.
Secure, Agile Networks revenues rose 29% year over year to $7.55 billion. End-to-End Security revenues were up 2% to $958 million. Internet for the Future revenues increased 5% to $1.39 billion. Optimized Application Experiences revenues were up 12% to $204 million. Revenues from Other Products increased 19% to $3 million.
Collaboration revenues decreased 13% on a year-over-year basis to $985 million.
Service revenues (23.9% of total revenues) inched up 2.7% year over year to $3.48 billion.
Quarter in Detail
Region-wise, America’s revenues increased 13% year over year to $8.63 billion. EMEA revenues increased 16% from the year-ago quarter to $3.81 billion. APJC revenues increased 11% year over year to $2.13 billion.
Annualized recurring revenues came in at $23.8 billion, up 6% year over year and product ARR increased 10% year over year.
Non-GAAP gross margin contracted 20 basis points (bps) from the year-ago quarter’s level to 65.2%.
On a non-GAAP basis, the product gross margin expanded 40 bps to 64.5%. Service gross margin contracted 160 bps to 67.3%.
Non-GAAP operating expenses were $4.55 billion, up 15.8% year over year. As a percentage of revenues, operating expenses increased 60 bps year over year to 31.3%.
Non-GAAP operating margin contracted 80 bps year over year to 33.9%.
Balance Sheet and Cash Flow
As of Apr 29, 2023, Cisco’s cash & cash equivalents and investments balance were $23.29 billion compared with $22.05 billion as of Jan 28, 2023.
Total debt (short-term plus long-term) as of Apr 29, 2023, was $8.39 billion compared with $8.89 billion as of Jan 28, 2023.
Cash flow from operating activities was $5.2 billion, higher than the $4.7 billion reported in the previous quarter.
The remaining performance obligations (“RPO”) at the end of the fiscal third quarter were $32.1 billion, up 6%, with 53% of this amount to be recognized as revenues over the next 12 months. Product RPO was up 9% and service RPO was up 4%.
Guidance
For fourth-quarter fiscal 2023, revenues are expected to grow between 14% and 16% on a year-over-year basis.
Non-GAAP gross margin is anticipated between 64.5% and 65.5% for the quarter.
Non-GAAP operating margin is anticipated between 34% and 35% for the quarter. Non-GAAP earnings are anticipated between $1.05 and $1.07 per share.
For fiscal 2023, revenues are expected to rise 10-10.5% on a year-over-year basis. Non-GAAP earnings are anticipated between $3.80 and $3.82 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, Cisco has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Cisco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.