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Cisco Earnings Preview: Expect Solid Results

NEW YORK (TheStreet) -- Networking giant Cisco Cisco (CSCO ) will report its fourth quarter earnings Wednesday after the bell.

Analysts polled by Thomson Reuters expect the networking giant to earn of 51 cents on revenues of $12.41 billion, increases of 8% and 6%, respectively, year-to-year. Last quarter, the company reported adjusted earnings of 51 cents a share on revenue of $12.2 billion, exceeding analysts' expectation of 49 cents a share on revenue of $12.18 billion.

Deutsche Bank's Brian Modoff reiterated his "buy" rating, predicting revenues slightly above the consensus. He cited strength in Cisco's telecommunications and security businesses, the latter driven by the company's decision to sell its Next-Gen Firewall and Cloud/Virtualized Security solutions around the recently acquired SourceFire IPS portfolio. Modoff expects growth in the United States; flat sales in Europe, the Middle East, and Africa; near-term weakness in Japan due to foreign exchange; and weaker than expected sales in Brazil, Russia, India, and China. In addition, he raised his price target from $26 to $28 based on expected product cycle ramping in "switching, routing, mobility, security platforms, and Services" in 2014.

In contrast, Oppenheimer's Ittai Kidron, who has a $27 price target on Cisco, believes his estimates are "appropriate given concerns regarding the macro environment and intensifying competition." However, he warned that a "significant change in US enterprise spending or weakness in a major emerging market such as China or India could hamper growth," because Cisco is more exposed in those areas than other vendors in the sector. Additionally, Cisco's focus on strategic acquisitions presents both growth opportunities and significant execution risk." Kidron maintained his "outperform" rating given steady demand and higher organic growth. He also cited improving sentiment for Cisco's security systems, which have struggled since achieving revenues of $1.7 billion in 2010. Echoing Modoff, he wrote that the SoureFire acquisition in that sector would "further bolster" Cisco's position.

Wells Fargo's Jess Lubert also reiterated his "outperform" rating. He pointed to "data center switching, edge routing, wireless LAN, and the UCS business" as product categories driving growth and, like Kidron, wrote that growth in North America and stabilization in Europe offset mixed results in China. Also like Kidron, he argued that Cisco guided conservatively and will therefore report sales in the high end of guidance. Cisco's strong execution is particularly beneficial: "Cisco is responding quickly and effectively to customer requests... enabling Cisco to gain share across multiple product categories and end-markets" Lubert's bullish prognosis for Cisco is bullish is due to the company's dividend yield of 2.6% and "superior leverage to the economic cycle."

--Written by Laura Berman in New York

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