One Bright Spot For Cisco Systems

Following the release of fiscal year first quarter results by Cisco Systems, Inc. (NASDAQ: CSCO), MKM Partners highlighted security as one bright spot for the company.

Security Business Fortified

Analyst Michael Genovese noted that security sales rose 11 percent year-over-year to $540 million, with the management touting it is the only security vendor with over $2 billion in annual sales growing in double digits. The analyst said he is impressed with the company's showing in this category, where it has the most complete and end-to-end portfolio of Security products.

Soft Guidance

Reviewing the first-quarter results, MKM Partners noted that the company reported solid numbers for the first quarter. However, the company's second-quarter revenue guidance was much softer than expected, the firm said.

The firm also noted that orders declined, with service provider orders remaining particularly weak due to a combination of factors, including currency, macro concerns and caution among carriers due to heightened M&A activity in the sector. Additionally, commercial or SMB order growth decelerated and among geographies, Americas was soft. The firm also indicated that recurring revenue percentage is increasing, although the increase has come at the expense of overall revenue growth.

Lowering Estimates, Fair Value

Following the lackluster guidance, MKM Partners lowered its 2017 and 2018 estimates by over $2 billion per year and its earnings per share estimates by about 3 percent per year.

MKM Partners also lowered its fair value estimate to $31 from $32, based on 13 times its calendar year 2017 earnings per forecast of $2.38. The firm has a Neutral rating on the company's shares.

At last check, Cisco was down 5.07 percent at $29.97.

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