Low Expectations Ahead Of Cisco's Q1 Results

With Cisco Systems, Inc. (NASDAQ: CSCO) scheduled to report its FQ1 2017 results on Thursday, Wunderlich’s Matthew Robison expects expectations to have been set low.

Robison maintained a Hold rating on the company, with a price target of $27.

Low Guidance

Cisco has guided to non-GAAP EPS of $0.58-$0.60, on revenue of $12.15-$12.73 billion for Q1, reflecting revenue growth of -1 to +1 percent year-on-year.

With FQ4 2016 having been the first in five quarters with a year-on-year increase in enterprise orders, the analyst believes the enterprise comparisons are likely to be easier.

“However, expect enterprise headwinds to remain greater than those of smaller accounts due to consideration of macroeconomic and geopolitical topics by enterprise decision makers,” Robison mentioned.

On the other hand, the analyst expect tough comparisons for Service Provider orders, especially given that the large video project order in China was completed in early CY2016.

Although upgrades and the deployment of new products might help, Robison expects the absence of spending growth among mobile operators to have a meaningful impact.

Some Positives

Cisco Systems’ strategy to diversify its business through the introduction of software based networking tools, as well as security services, while lowering dependence on specialized routers and switching equipment seems to be bearing fruit.

In addition, the Commercial segment is expected to do relatively well, while the analyst expects the E-rate K-12 IT subsidy to have hurt Cisco’s wireless segment.

Security sales and Collaboration are expected to have seem growth similar to that seen in Q4, driven by license revenue and the fundamental strength of the Security industry.

Some even expect the company to have continued its robust execution track record and beat expectations for the quarter.

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