Market News

Cisco Drops 4.6% Pre-Market On Flat Sales Growth In 2Q

Cisco Systems’ shares slipped 4.6% in Wednesday’s pre-market trading session, as the company’s revenues in the second fiscal quarter came in at $12 billion, flat year-on-year, but ahead of analysts’ estimates of $11.9 billion.

The technology giant reported second-quarter earnings per share (EPS) of $0.79, that came in ahead of the Street consensus of $0.76.

Cisco’s (CSCO) CEO Chuck Robbins said, “We are seeing encouraging signs of strength across our business showing how our technology will be a powerful engine for recovery and growth. Our team delivered a strong performance as we partnered with customers on accelerating their digital transformation and driving secure, remote work.”

Segment by segment results showed that the company generated $3.6 billion in revenues from its software business in 2Q with 76% of that revenue coming from software subscriptions. Cisco also increased its quarterly dividend by 3% to $0.37 per share from the previous quarter, which will be paid on April 28 to all shareholders on record as on April 6. (See Cisco Systems stock analysis on TipRanks)

In the fiscal third quarter, the company expects sales to grow between 3.5% to 5.5% year-on-year. EPS is forecasted to land between $0.64 to $0.69 in 3Q.

Following the earnings results, Robert W. Baird analyst Jonathan Ruykhaver maintained a Hold rating and price target of $46 on the stock.

“Cisco experienced improved order growth across all major geographies and customer segments,” Ruykhaver wrote in a note to investors. “However, while improved QoQ, enterprise remains under pressure from the macro environment, apparent in weak product orders and performance in the infrastructure platforms segment.”

“Positive takeaways include strength in Catalyst 9K switches, collaboration, security, and webscale,” the analyst added.

The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 6 analysts recommending a Buy and 7 analysts suggesting a Hold. The average analyst price target of $49.89 implies 2.9% upside potential to current levels.

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