Cisco Systems Q1 Earnings: Exciting Times

Large cap networking stock Cisco Systems, Inc (NASDAQ: CSCO) reportedQ1FY18 after the market closed Wednesday with the results being as follows:

GAAP Results
Q1 FY 2018 Q1 FY 2017 Vs. Q1 FY 2017
Revenue $ 12.1 billion $ 12.4 billion (2)%
Net Income $ 2.4 billion $ 2.3 billion 3%
Diluted Earnings per Share (EPS) $ 0.48 $ 0.46 4%

Q2 FY 2018 outlook was given as the following:

Revenue: 1% to 3% growth year over year Earnings per Share: GAAP $0.46 to $0.51; Non-GAAP: $0.58 to $0.60

The CEO commented:

“Our results in Q1 demonstrate the continued progress we’re making on our strategy. The network has never been more critical to business success. Cisco is delivering more insights and intelligence as we help our customers build highly secure, intelligent platforms for digital business.”

The CFO added:

“We delivered a solid Q1 and executed well as we focus on strategic priorities and maintaining rigorous discipline on profitability and cash generation. We delivered strong growth in operating and free cash flow, focused investments on long term profitable growth, and returned $3.1 billion to shareholders through repurchases and quarterly dividends.”

In a Barrons interview after the earnings call, the CFOnoted first off that Cisco Systems had beaten its own outlook for revenue and earnings per share last quarter, adding “but more important, were seeing the benefit of this transformation we have been going through the last couple of years.” She also noted: “Its an exciting time and weve been steadily executing.”

Cisco Systems was a previous Elite Opportunity Pro (EOP)portfolio pick in the past with our SCN EO newsletter having this to say in August 2015:

just like we’ve continued to suggest owning Amazon (AMZN) and Google (GOOGL) for the long haul, we’re convinced CSCO is another stock to own for the next several years, even with the current markets hovering around all-time highs. You won’t hear us say that about many stocks right now, but when you dig into Cisco’s valuation metrics, there’s plenty to like. Our theme of continuing to diversify with solid companies across various sectors is evidenced by today’s addition of CSCO. We’ll set our long-term target at $80, which dates back to the stock’s all-time high back in 2000. It’s obviously going to take a long time to get there, but this is precisely why we’re not going to provide a short-term SSL. This strategy clearly suggests we believe CSCO is a stock to own for the next several years, regardless of what it does over the next few months.

In January, our newsletter suggested that it wastime to get back intothe stock:

Following this morning’s surprising acquisition of AppDynamics for $3.7B, and after listening to Cisco’s CEO Chuck Robbins this morning, we’re convinced this could be the year CSCO finally starts to behave like many of its Internet Bubble counterparts have over the last few years, like Amazon, Microsoft and so many others.

If you’re looking for broad exposure to everything from cyber security to the Internet of Things (IoT), don’t think for one second CSCO doesn’t offer some of the broadest and best exposure to those tech sectors which stand to grow substantially over the next several years

Provided below is a weekly chart of the stock, and as you can see, it really hasn’t done much ever since it topped out back in September of last year. However, you can also see the stock still hasn’t managed to retrace either its3/8th’s or more attractively its 5/8th’s retracement level from last year’s low to last year’s high.

A technical chart for Cisco Systems shows shares recently testing a key resistance level at the $34.50 level:

A long term performance chart shows large caps Cisco Systems and Motorola Solutions Inc (NYSE: MSI) giving roughly the same positive albeit sometimes bumpy performance whileQualcomm, Inc (NASDAQ: QCOM) has fallen in and out of negative territory:

Finally, here is a quick recap of Cisco Systems recent earnings history along with EPS estimate trends from the Yahoo! Finance analyst estimates page going into the current earnings report:

Earnings History10/30/20161/30/20174/29/20177/30/2017
EPS Est. 0.59 0.56 0.58 0.61
EPS Actual 0.61 0.57 0.6 0.61
Difference 0.02 0.01 0.02 0
Surprise % 3.40% 1.80% 3.40% 0.00%
EPS TrendCurrent Qtr. (Oct 2017)Next Qtr. (Jan 2018)Current Year (2018)Next Year (2019)
Current Estimate 0.6 0.58 2.43 2.56
7 Days Ago 0.6 0.58 2.43 2.55
30 Days Ago 0.6 0.58 2.43 2.55
60 Days Ago 0.6 0.58 2.43 2.55
90 Days Ago 0.6 0.58 2.43 2.55

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