Cisco (CSCO) Stock Takes a Hit, Jim Cramer Comments on Q1 Earnings

Cisco Systems (CSCO) stock is tumbling on Friday after the telecommunications equipment company yesterday gave a weak earnings outlook along with its latest quarterly results.
By U-Jin Lee ,

NEW YORK (TheStreet) -- Cisco Systems (CSCO) - Get Report  stock is tumbling 6.18% to $26.11 on Friday after the telecommunications equipment company yesterday gave a weak earnings outlook along with its latest quarterly results. 

For the first quarter of 2016, the company reported a profit of 59 cents a share, topping analysts' forecasts of 56 cents a share. Revenue of $12.68 billion beat estimates of $12.65 billion.

In the same period a year ago, the company earned 54 cents a share on revenue of $12.2 billion.

TheStreet's Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust Portfolio commented in an Action Alerts PLUS article titled 'Cisco Beat Comes With Concerns,' saying: "Our first concern comes around operating margins, which appear to be substantially lower than expected (roughly 24% vs. guidance of 28% to 29%)."

However, year-over-year sales increased 4% due to a growth in product revenue and service revenue, the company said.

Along with the earnings results, Cisco gave an earnings outlook for the second quarter of 2016, which was below analysts' expectations. It now projects profits to be between the range of 53 cents a share to 55 cents a share, even though analysts predicted 56. 

This is due to headwinds such as foreign exchange and macroeconomic challenges, which also negatively impacted the company in the recent quarter. 

"Despite these headwinds, I believe we are executing very well. We are moving very fast to capture new opportunities and I feel good about how we are positioned for the second half of the year," CEO Chuck Robbins stated.

Separately, TheStreet Ratings team rates CISCO SYSTEMS INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

We rate CISCO SYSTEMS INC (CSCO) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, notable return on equity, increase in net income and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

You can view the full analysis from the report here: CSCO

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