Cisco Systems(CSCO) issued a better-than-expected earnings outlook for 2023, prompting CSCO shares to move higher on Thursday.
Amid lowered expectations, Cisco’s fourth quarter fiscal 2022 results surpassed Wall Street estimates. Cisco shares rose 4.9% to 48.95 in stock market premarket trading today.
The computer networking giant reported profit for the July quarter after the market closed on Wednesday. Analysts were encouraged by the report, but expressed some caution.
“Cisco’s first quarter and full-year 2023 revenue expectations were above Street, although gross margin is still dampened by components and logistics,” Barclays analyst Tim Long said in a note to customers.
CSCO Inventory: Product Orders Fall
Long continued, “Management cited continued strong demand visibility, record annual recurring revenue and sees supply chain pressure easing through fiscal 2023. Future gross margin is expected to be lower, but may prove conservative due to the higher prices going into effect. Cisco sees no signs of significant order cancellations or a slowdown in demand.”
Adjusted earnings for CSCO stock came in at 83 cents per share, down 1% from a year earlier. Sales were flat at $13.1 billion, including acquisitions.
Analysts estimate Cisco would earn 82 cents a share on $12.73 billion in revenue, according to FactSet.
“While product orders fell 6% year-on-year (after a difficult comparison of 31% growth a year ago), sequential 15% growth in product orders has signaled continued sustainable demand,” Credit Suisse analyst Sami Badri said in a note. . .
Cisco Inventory: 2023 Sales Guidance Above Views
For the current fiscal first quarter ending in October, Cisco forecasts profits of 82 to 84 cents versus estimates of 84 cents. Cisco forecast revenue growth of 2% to 4%, compared to flat revenue growth forecasts.
For fiscal 2023, Cisco expects revenue growth of 4% to 6% from estimates of 3% revenue growth to $52.7 billion.
Heading into the Cisco earnings report, the company held a Relative Strength Rating of 26 out of the best 99 possible, according to IBD Stock Checkup. CSCO shares were down 26% by 2022.
In addition, CSCO’s inventory has shifted from its core business of selling network switches and routers. Cisco has sought to increase revenue from software and services through acquisitions.
But Cisco’s pivot to subscription software revenue has stalled. Software has fluctuated around 30% of total revenue for the past six quarters, according to a report by Raymond James.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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