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Cisco’s Q4 Earnings Outlook Miss Estimates After Q3 Beat; Shares Drop After-Hours

Cisco Systems (CSCO) forecast lower-than-expected earnings in the fiscal fourth quarter after results topped consensus estimates in fiscal Q3. Shares of the manufacturer of networking hardware, software, telecommunications equipment, and other high-technology services and products plunged 5.6% in Wednesday’s extended trading session.

Cisco reported adjusted Q3 earnings of $0.83 per share, up 5% year-over-year. Analysts had expected the company to report EPS of $0.82.

Revenues surged 7% year-over-year to $12.8 billion and outpaced the consensus estimate of $12.56 billion. Strong performance across the business drove results.

Adjusted gross margin was 66% in the quarter, down 60 basis points year-over-year. (See Cisco stock analysis on TipRanks)

Cisco CEO Chuck Robbins commented, “We are confident in our strategy and our ability to lead the next phase of the recovery as our customers accelerate their adoption of hybrid work, digital transformation, cloud, and continued strong uptake of our subscription-based offerings.”

For the fourth quarter of Fiscal 2021, revenue is expected to reflect 6% – 8% year-over-year growth. Adjusted EPS is forecast in the range of $0.81 – $0.83, versus analysts’ expectations of $0.85.

On May 17, Morgan Stanley analyst Meta Marshall reiterated a Buy rating and a price target of $57 (8.6% upside potential) on the stock.

According to Marshall, the company remains well-positioned amid a recovery in the IT spending environment. Furthermore, the analyst argues that the coming rebound has not yet been priced into the stock’s current valuation.

The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 8 Buys versus 5 Holds. The average analyst price target of $57.10 implies 8.8% upside potential to current levels. Shares have increased 15.5% over the past year.

TipRanks data shows that financial blogger opinions are 94% Bullish on CSCO, compared to a sector average of 69%.

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