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Cisco (CSCO) to Report Q3 Earnings: What’s in the Cards?


Cisco Systems Inc, CSCO is set to release third-quarter fiscal 2017 earnings on May 17. In the last quarter, the company reported a positive earnings surprise of 6%.

We note that the stock has outperformed the Zacks Consensus Estimate thrice and posted in-line results in one occasion in the trailing four quarters. It has an average positive surprise of 3.3%.

We note that, shares of Cisco have marginally outperformed the broader Zacks Computer-Networks industry on a year-to-date basis. While the industry was up 9.9%, the stock gained 10.7%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Intensifying competition from several smaller players, slowing order growth from service providers and challenges in the emerging markets may continue to drag Cisco’s to-be-reported quarterly results. A sluggish IT spending forecast by Gartner also remains a major headwind. Notably, the company has been losing market share and witnessing declining revenues trend due to the aforementioned factors.

Nonetheless, the acquisition of AppDynamics in March has helped the company to gain traction in the application and business monitoring space. The buyout will also be accretive to Cisco’s third-quarter top-line performance, in our opinion. Notably, as an independent company, AppDynamics had registered 50% year-over-year growth in the last fiscal.

Moreover, partnerships with the likes of Pure Storage, salesforce.com and IBM will also positively impact the to-be-reported quarterly results.

Earnings Whispers?

Our proven model does not conclusively show that Cisco will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Cisco’s Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 53 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cisco carries a Zacks Rank #4 (Sell). Note that, we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Angie's List, Inc. ANGI has an Earnings ESP of +37.5% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Materials, Inc. AMAT, has an Earnings ESP of +1.32% and a Zacks Rank #2.

DST Systems, Inc. DST has an Earnings ESP of +0.64% and a Zacks Rank #2.

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