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
TheStreet Open House

Cisco Looks Strong Ahead of Earnings

NEW YORK ( TheStreet) -- After starting off the year trading at $19.36 per share, Cisco's (CSCO) has soared by as much as 37%. It's taken almost two years, but the Street finally seems warm to the idea that the networking giant can still be a growth story, if not a dominant cash-flow generating machine.

In that regard, I don't believe Cisco's management has gotten the credit it deserves, particularly CEO John Chambers, who has gotten more than his share of criticism. The company has ignored all of the noise, focusing solely on execution. You will be hard pressed to find a company in any sector that is executing better than Cisco, which will be going for its tenth consecutive earnings beat.

On Wednesday, after the market close, the company will report fiscal fourth-quarter and year-end results. The Street will be looking for earnings per share of 51 cents for the quarter, which would represent 8% year-over-year growth. Revenue, meanwhile, is expected to come to $12.41 billion, or 6% year-over-year increase. Investors are anxious to see if Cisco, which still looks undervalued by 15%, can maintain its momentum.

Unlike recent quarters, the Street has become more bullish on Cisco's expectations, which has seen its stock jump to its highest level in two years. Although Cisco is known for its industry-leading routing and switching businesses, management has been working hard to transition the company out of the hardware mindset, while building up Cisco's capabilities into what is called software-defined networking, or SDN.

What's more, the company has been on a shopping spree -- most recently picking off anti-hacking giant Sourcefire (FIRE) for $2.7 billion. This deal comes amid a slew of other acquisitions for Meraki, Cariden and BroadHop.

In other words, as the hardware businesses continue to erode, management has left no stone unturned looking to diversify Cisco into higher-margin businesses. Given the stock's strong performance on the year to date, the Street loves the changeover.

Without question the Street has bet correctly on Cisco. On Wednesday, I expect that management will outline the company's strategic vision more clearly. I will also be listening very closely to hear what management says about what spurred the deal for Sourcefire, a deal for which I believe Cisco overpaid. Even so, to the extent that Cisco's correct on Sourfire's growth potential, this deal should potentially add an extra 2% (at least) to Cisco's long-term revenue growth.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
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 17,131.97 +100.83 0.59%
S&P 500 1,998.98 +14.85 0.75%
NASDAQ 4,552.7590 +33.8570 0.75%

Brokerage Partners

Rates from Bankrate.com

  • 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