Cisco Systems‘ (CSCO) issued better-than-expected 2023 earnings guidance and sent CSCO stock up on Thursday. But analysts debated the outlook for profit margins as supply chain problems ease.
Amid lowered expectations, Cisco’s fourth-quarter financial results for 2022 topped Wall Street estimates. Cisco shares climbed 5.8% to close at 49.37 on the stock market today.
The computer networking giant reported earnings for the July quarter after the market closed on Wednesday.
Cisco Stock: Earnings Outlook
For fiscal 2023, Cisco said it expects sales growth in a range of 4% to 6% versus estimates of 3% sales growth to $52.7 billion.
“We believe the 4% to 6% revenue growth guidance for 2023 is on the conservative side given the record backlog and remaining performance obligations of $31 billion, of which $17 billion will be recognized over the next 12 months,” the CFRA Research analyst said. Keith Snyder in a report.
Cisco’s EPS guidance in a range of $3.49 to $3.56 was in line with consensus estimates.
“Cisco’s fiscal 1Q and full 2023 revenue guidance was above the Street, although gross margin continues to be dampened by components and logistics,” Barclays analyst Tim Long said in a note to clients.
CSCO inventory: Product orders fall
Long went on to say, “Management cited continued strong demand visibility, record annual recurring revenue and sees supply chain pressures easing in fiscal 2023. Forward gross margin is guided lower but may prove conservative due to higher prices taking effect. Cisco sees no signs of significant order cancellations or a slowdown in demand.”
At UBS, analyst David Vogt had a similar view. “The negative impact from aggressive component procurement resulted in (fiscal Q4) product gross margins of 61.3%, the lowest level since Q4, 2018,” he said in a report. “As Cisco balances meeting customer demand to protect stock, product gross margins will remain under pressure.”
Adjusted earnings for CSCO stock came in at 83 cents per share, down 1% from a year earlier. Revenue was flat at $13.1 billion, including acquisitions.
Analysts estimated Cisco would earn 82 cents a share on revenue of $12.73 billion, according to FactSet.
“While product orders fell 6% year-over-year (over a difficult comparison of 31% growth a year ago), a 15% sequential growth in product orders signaled continued durable demand,” Credit Suisse analyst Sami Badri said in a note. .
At Bank of America, analyst Tal Liani said: “Cisco‘The feedback and results were generally positive, but there are parts that are less than ideal, partly due to harsh comparisons.”
He added: “Cloud orders were down in Q4, enterprise orders down 15%, public sector down 3%, commercial up 1% and pservice ppredators order down 7%.”
Cisco Stock: Sales Guidance for 2023 above
For the current fiscal first quarter ending in October, Cisco forecast earnings in a range of 82 cents to 84 cents vs. estimates of 84 cents. Cisco projected revenue growth of 2% to 4%, compared to estimates of flat sales growth.
Heading into Cisco’s earnings report, the company owned a relative strength rating of 26 out of a possible 99, according to IBD Stock Checkup. CSCO stock had fallen 26% in 2022.
In addition, CSCO stock has moved away from its core business of selling network switches and routers. With acquisitions, Cisco has aimed to increase revenue from software and services.
But Cisco’s turn to subscription software revenue has stalled. Software has hovered around 30% of total revenue for the past six quarters, a Raymond James report said.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on wireless 5G, artificial intelligence, cyber security and the cloud.
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