Can Cisco Beat These Earnings Expectations?

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With the impending fiscal cliff, lagging demand, and downbeat year-end earnings forecasts throughout the high-tech sector, the negative sentiment surrounding Cisco Systems (NASDAQ:CSCO) has reached critical mass.

Ahead of the company’s fiscal first quarter earnings statement, due Tuesday afternoon, many analysts are predicting that the Cisco may have difficulties meeting Wall Street’s estimates for the period. JPMorgan analyst Rod Hall downgraded the stock to a neutral rating on Friday. In an accompanying research note he wrote that the company’s fiscal second quarter guidance is “likely to disappoint.” On Monday, Citigroup analyst Kevin Dennean of Citigroup cut his price target for the company from $21 to $20. Stifel Nicolaus analyst Sanjiv Wadhwani wrote in a recent research note that he expects Cisco to miss the revenue estimate “driven by a slowdown in demand in the U.S., especially over the last two months.”

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But not all analysts are bearish towards Cisco; according to Thomson Reuters, 60 percent of covering brokers rate the shares a buy.

For the three-month period ended on October 27, analysts expect Cisco to report earnings per share of 46 cents and a revenue of 11.78 billion. In comparison, the company posted earnings of 43 cents per share on revenue of $11.26 billion in the year-ago quarter. However, the company has projected a slightly lower revenue target, which was given during the last quarter’s earnings conference call. As MarketWatch reported, Chief Executive John Chambers warned that he expected the European market to continue to be “very challenging over the next several quarters.”

While shares of Cisco increased by a fraction on Monday, closing at $16.86, the company’s stock price has decreased by 11 percent since early October. According to FactSet, the stock currently trades at approximately 8.5 times estimated earnings for the next four quarters, and below the average multiple for its sector on the S&P 500.

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