After the closing bell on Wednesday, one of the tech primes – Cisco Systems (CSCO – Free Report) – came up with solid fiscal third-quarter results, beating our estimates for both the top and the bottom line. However, investors were disappointed with a bleak revenue guidance.
Earnings of 54 cents per share surpassed the Zacks Consensus Estimate by a penny. Revenues declined 1% year over year to $11.90 billion but edged past our estimate of $11.89 billion.
The networking leader has been transitioning its traditional business of high-end switches and routers to high-growth areas such as security, the Internet of Things and cloud computing. As a result, Cisco expects revenues to decline 4-6% year over year for the ongoing fiscal fourth quarter. The projection is worse than the Zacks Consensus Estimate of a 0.94% decline. Earnings per share are expected in the range of 60–62 cents, the midpoint of which is much above the Zacks Consensus Estimate of 58 cents.
The bleak revenue outlook took a toll on investors’ sentiment, pushing CSCO shares down as much as 8.6% in after-hours trading yesterday. Additionally, the stock lost 7.5% in pre-market trade today at the time of writing.
Currently, Cisco has a Zacks Rank #4 (Sell) with a VGM Style Score of B and boasts a dismal Industry Rank in the bottom 8%, indicating that the some pain is in store for the stock. Further, the world’s largest networking gear maker has returned 13.7% over the past one year, much below the Zacks categorized Computer – Networking industry’s return of 22.8%.
