Is Cisco an Outperform?

With shares of Cisco Systems (NASDAQ:CSCO) trading at around $20.80, is CSCO an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Cisco-Logo_0Before we get to the news that you might already know – earnings numbers and guidance – let’s take a look at five fun and interesting facts about Cisco. One, the company was started nearly 40 years ago when a husband and wife working at Stanford University wanted to communicate via email. What makes this fact even more interesting is that when Cisco went public in 1990, one of them – Sandra Lerner – was fired. This immediately led to her husband, Leonard Bosack, quitting, which was probably what the company was banking on.

Two, the name Cisco comes from San Francisco. This is why the “C” in Cisco wasn’t capitalized in the early days. Three, John Chamber has been with the company since 1995. At that time, it was just a $1.2 billion company. Good job, Mr. Chambers! Four, Cisco has made more than 150 acquisitions. Five, the CR-3 routing system is capable of downloading the entire Library of Congress in less than two seconds, and it’s capable of streaming every motion picture ever made in less than four minutes. Impressive.

Obviously, those aren’t catalysts for the stock’s movement, but there is a good chance that you have been reading the same Cisco news over and over again. It’s nice to mix it up once in a while. Let’s get to the numbers that you might already know, as well as catalysts for the stock’s movement. Minus items, Q2 EPS came in at $0.51 versus an average expectation of $0.48. Q2 revenue was up 5 percent to $12.1 billion. The average expectation was $12.06 billion. For the current quarter, minus items, Cisco expects EPS of $0.48 to $0.50. Revenue is expected to come in between $12.05 billion and $12.28 billion.

As expected, revenue in the Americas and Asia was strong while Europe, the Middle East, and Africa weighed on results. Perhaps the most important news was a specific comment made by CEO John Chambers. He stated, “2013 is off to a slow start.” However, he also stated that business should pick up as the year goes on.   

Let’s take a look at some important numbers prior to forming an opinion on this stock…