Gaining Momentum After Q2 Results Beat, Market Still Expects Difficulties Ahead

CSCO edged higher on Wednesday, closing up by 0.23% at $20.43 after it released its earnings results for the second quarter. CSCO’s revenue increased 10.8% to $11.5 billion as compared to a year ago, generating a non-GAAP EPS of $0.47, both of which beat analyst estimates. The second quarter results reflected the benefits of the company’s restructuring efforts and the organizational changes they have made during the period. The company also announced that they were increasing the quarterly dividend to $0.08 a share. For the third quarter Cisco guided for revenue up 5%-7% from last year; suggesting a range of $11.41 billion to $11.63 billion. The company also guided for non-GAAP EPS of $0.45- $0.47.

CSCO is currently trading at a 2.1x EV/IC’, implying the market is expecting 12% ROI’ with IC’ growth of 2% over the next 5 years. These expectations are lower than the consensus-based ROI’ and IC’ growth driven estimates, implying that the market is still pricing in CSCO to have difficulties, and are discounting a successful turnaround effort.

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