This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Cisco: It Has To Be Great, Just To Be Good

Stocks in this article: CSCO HPQ

NEW YORK ( TheStreet) -- Like fine wine, appreciating "value" on Wall Street is often an acquired taste. As the market continues to demonstrate its insatiable appetite for both growth and instant gratification, it seems that stocks that present tremendous value are often overlooked and sometimes treated like red-headed step-children.

Disappointingly, the result is often a blatant disregard for fundamental analysis and an overall ignorance toward the things that ultimately impact the bottom line. One such example is what has unfolded at Cisco (CSCO) since the network giant reported its recent earnings results.

On the heels of rival Hewlett-Packard (HPQ) having reported better-than-expected second-quarter numbers, I have started to reassess why Cisco absorbed the post-earnings punishment that it did, whereas the market rewarded HP with an immediate 10% jump in its stock price. HP reported earnings per share of 98 cents on revenue of $30.7 billion -- beating analysts' estimates on both the top and the bottom line while analysts were expecting EPS of 91 cents on revenues of $29.91 billion.

Cisco on the other hand reported third-quarter earnings results of 48 cents per share -- topping analysts' estimates of 47 cents while representing an increase of 14% from the 42 cents it earned in previous year. The company reported net income of $2.2 billion or 40 cents per share on revenue of $11.6 billion -- topping net income of $1.8 billion or 33 cents per share for the same period last year. So what was the problem?

As much as I respect the turnaround story that is under way at HP, I can also admit that though the numbers were good, they were not great -- particularly from the standpoint of annual growth. Both revenue and EPS were actually down 3% and 21% respectively where Cisco showed an increase in both categories.

Furthermore, both companies issued guidance below Wall Street's expectations as they both opted to play it conservatively in light of the concerns surrounding Europe.

Moreover, as a way to highlight the inequity that exists with investors, one of Cisco's chief rivals in Riverbed (RVBD) recently reported earnings that missed on both the top and bottom lines. Yet its stock still enjoys a multiple of 50, four times that of Cisco's.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,796.09 +17.94 0.10%
S&P 500 2,064.50 +3.27 0.16%
NASDAQ 4,748.9970 +0.6010 0.01%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs