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Cisco (CSCO) to Report Q4 Earnings: Is a Beat in the Cards?

Cisco Systems, Inc. CSCO is set to report fourth-quarter fiscal 2020 results on Aug 12.

For fourth-quarter fiscal 2020, the company anticipates revenues to decline 8.5-11.5% on a year-over-year basis. The Zacks Consensus Estimate for revenues is pegged at $12.09 billion, indicating a decline of 9.9% over the year-ago reported figure.

Non-GAAP earnings are anticipated between 72 cents and 74 cents per share. The Zacks Consensus Estimate for earnings stands at 74 cents per share, stable in the past seven days. The figure indicates a decline of 10.8% from the prior-year quarter.

Notably, the company has a trailing four-quarter earnings surprise of 3.99%, on average.

Factors to Note

Solid demand for Webex Meetings, Webex Devices and Webex Teams, triggered by coronavirus crisis led work-from-home wave and demand for telehealth services, are expected to have contributed to the fiscal fourth-quarter performance. Markedly, in fiscal third quarter earnings conference, management stated that 95% of the Fortune 500 is now utilizing Cisco’s collaboration solutions.

Besides, the company updates its Webex portfolio on a monthly basis to aid users enhance productivity with advancements in video conferencing. Integration of advanced AI and ML capabilities is expected to have bolstered engagement and driven adoption. This, in turn, may get reflected in the to-be-reported quarter’s results.

During fiscal fourth quarter, Cisco launched a portfolio of business resiliency solutions to aid enterprises boost workforce and workplace productivity. The company also unveiled solutions focused on distance learning, and telehealth services.

Cisco Systems, Inc. Price and EPS Surprise

Cisco Systems, Inc. Price and EPS Surprise
Cisco Systems, Inc. Price and EPS Surprise

Cisco Systems, Inc. price-eps-surprise | Cisco Systems, Inc. Quote

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Moreover, momentum in web security, unified threat, and network security and advanced threat offerings, driven by spending on cybersecurity as employees work remotely and surge in Internet traffic, might have aided fiscal fourth-quarter performance.

Also, robust adoption of 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 expand clientele.

In fact, Cisco recently announced that Verizon Business is utilizing the former’s 5000 Series Enterprise Network Compute System (ENCS) purpose-built platform to expand Virtual Network Services (VNS) portfolio.

Additionally, strength in company’s Meraki solutions is likely to have driven growth in wireless 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.

Further, in data-center vertical, momentum in the HyperFlex data-center solution is likely to have continued in the fiscal fourth quarter, driven by coronavirus induced demand for cloud computing solutions. This, in turn, is likely to get reflected in the to-be-reported quarter’s results.

However, increasing investments on portfolio expansion, product enhancements and acquisitions amid stiff competition from Arista ANET and Juniper in networking infrastructure market may have weighed on fiscal fourth-quarter margin expansion.

Moreover, decline in IT spending and coronavirus pandemic-induced broader macroeconomic weakness across small and medium sized businesses, is likely to have affected the fiscal fourth-quarter performance.

Key Developments in Q4

During the quarter under review, Cisco announced plans to acquire San Francisco, CA-based startup — ThousandEyes, Inc. The deal will enable the company to address growing demand for software solutions that can help enterprises deal with the uncertainty and chaos stemming from COVID-19 pandemic-induced dependence on the Internet and accelerated cloud adoption. The company expects the deal to be completed by the end of first-quarter fiscal 2021.

Moreover, the company’s cloud-based application performance management platform — AppDynamics — secured FedRAMP authorization at the moderate impact level from the FedRAMP Program Management Office (PMO). The authorization allows the company to sell the APM platform to government agencies.

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 +2.96% and a Zacks Rank #2. 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 a couple of other companies, which also have the right combination of elements to post an earnings beat this quarter:

Deere & Company DE has an Earnings ESP of +4.64% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Agilent Technologies, Inc. A has an Earnings ESP of +5.00% and a Zacks Rank #2.

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