CSCO Cisco Systems Inc

By Jay Greene 

Cisco Systems Inc. is scheduled to report fiscal third-quarter results after the market closes Wednesday. Here's what to watch.

EARNINGS FORECAST: Cisco is expected to report adjusted per-share earnings of 65 cents, according to an S&P Global Market Intelligence survey of analysts. That would be up from adjusted earnings of 60 cents a share a year earlier.

REVENUE FORECAST: Analysts expect Cisco to post revenue of $12.44 billion, up 4% from a year ago.

WHAT TO WATCH:

-- SUSTAINED GROWTH: Three months ago, Cisco reported revenue growth for the first time in two years and forecast growth for the just-ended quarter of between 3% and 5%. Since then, the networking-gear maker's stock has gained 9%. Deutsche Bank Securities Inc. analyst Vijay Bhagavath believes Cisco will edge past expectations and report $12.54 billion in sales, a bit more than 5% better than the year-ago figure. Mr. Bhagavath is counting on strong sales of network switches, growing software subscriptions and gains in optical networking-gear sales.

-- SECURITY BUNDLE: Cisco has beefed up its security portfolio in recent years, developing software services in-house and acquiring companies such as Observable Networks Inc. and CloudLock Inc. The company appears to have had success selling that technology along with its hardware, Morgan Stanley & Co. analyst James Faucette wrote in a recent research report. "We continue to hear anecdotal evidence of the pull-through effect between networking and security spend, instilled by Cisco's continued efforts to bundle larger solution sales," he wrote. About a quarter of currently deployed Cisco gear is too old for the company's security offerings, something that should boost hardware sales as well, according to Mr. Faucette.

-- CASH READY: As a legacy tech vendor, Cisco lacks the flash of startups with rapid growth potential. But the company's balance sheet is tough to beat. Last quarter, the company announced plans to repatriate $67 billion it held overseas, a result of the new U.S. tax law. Cisco said it would spend about $44 billion over the next two years on share buybacks and dividends. Even with that spending, Cisco likely will continue to look for opportunities to buy companies, said J.P. Morgan analyst Samik Chatterjee. In a recent research report, he suggested Cisco could continue to build out its security offerings through acquisitions.

Write to Jay Greene at Jay.Greene@wsj.com

(END) Dow Jones Newswires

May 16, 2018 05:44 ET (09:44 GMT)

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