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Cisco Systems Q4 Preview: Another EPS Beat Inbound?

·3 min read

The Zacks Computer and Technology Sector has tumbled year-to-date, down a steep 20% and vastly underperforming the S&P 500. However, over the last month, the sector has tacked on a stellar 14%, outperforming the general market by a notable margin.

Below is a table illustrating the sector’s performance vs. the S&P 500 over several timeframes.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

A titan residing in the sector, Cisco Systems CSCO, is slated to reveal Q4 results on Wednesday, August 17th, after market close.

Cisco Systems is an IP-based networking company offering products and services to service providers, companies, commercial users, and individuals.

In addition, the company currently carries a Zacks Rank #3 (Hold) with an overall VGM Score of a C. How does everything stack up for the company heading into the print? Let’s find out.

Share Performance & Valuation

Cisco shares have lost nearly a fourth of their value throughout 2022, declining 24% and vastly underperforming the general market.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

However, when buyers have been out in full force over the past month, CSCO shares have tacked on a rock-solid 9.4% in value. Still, the share performance has lagged the S&P 500.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

The company’s valuation levels are a major positive. CSCO’s 14.9X forward earnings multiple is nowhere near its five-year median value of 17.1X and represents a deep 41% discount relative to its Zacks Sector.

In addition, Cisco sports a Style Score of a B for Value.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Quarterly Estimates

Analysts have been silent for the quarter to be reported, with zero estimate revisions coming in over the last 60 days. Still, the Zacks Consensus EPS Estimate of $0.82 pencils in a marginal 2.4% decrease in quarterly earnings year-over-year.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Projections allude to marginal softening within the top-line as well – Cisco is forecasted to have generated $12.8 billion in revenue throughout the quarter, a decline of 2.8% from year-ago quarterly sales of $13.1 billion.

Quarterly Performance & Market Reactions

Cisco’s bottom-line performance has been outstanding – the company has exceeded the Zacks Consensus EPS Estimate in 19 consecutive quarters. Just in its latest print, the company recorded a 1.2% bottom-line beat.

Top-line results have also been rock-solid, with Cisco registering eight revenue beats over its last ten quarters. Below is a chart illustrating the company’s revenue on a quarterly basis.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

In addition, it’s worth noting that the market hasn’t reacted well as of late to the company’s quarterly prints – over its last three releases, shares have moved downwards twice following the report. Following its latest quarter, shares moved down by a massive 17.6%.

Putting Everything Together

Cisco shares have tumbled year-to-date, but the story has been the opposite over the last month. Still, shares have lagged the general market in both timeframes.

In addition, shares trade at solid valuation multiples, well below their five-year median and representing a deep discount relative to its Zacks Sector.

Quarterly estimates reflect a minor year-over-year hit within the top and bottom-lines, and analysts haven’t touched their estimates over the last 60 days.

Furthermore, the company has consistently reported quarterly results above expectations, but the market hasn’t been impressed as of late.

Heading into the quarterly print, Cisco Systems CSCO carries a Zacks Rank #3 (Hold).


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