Cisco Fans Getting Stoked

Shares have been rising heading into Wednesday's earnings report.
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Cisco (CSCO) - Get Report fans expect a hearty serving of piping hot quarterly numbers after the market's close today.

The San Jose, Calif., Internet gearmaker is likely to deliver another balanced performance, with strong growth areas like developing markets helping to offset weaker pockets like tech spending among U.S. businesses, say analysts and investors.

Analysts' checks of Cisco's supply and distribution channels show no major departures from the usual sales flow. And gear peers like

Juniper

(JNPR) - Get Report

and

Ciena

(CIEN) - Get Report

have already turned in strong third-quarter results, signaling business is good for high-performance network plumbing suppliers.

A consensus of analysts' estimates has Cisco turning in an adjusted profit of 36 cents a share on $9.54 billion in sales, according to Thomson Financial First Call.

I expect they will deliver a "slight upside" to earnings, says one investor, referring, to the customary penny beat that Cisco has been able to hit with predictable frequency over the years. "Perhaps there will be a sprinkle of weak U.S. enterprise, but overall it should be bullish," says the money manager who is long the stock.

As always, the biggest suspense surrounds Cisco's outlook. In August, Cisco said it expected fiscal 2008 sales growth somewhere in a range between 13% and 16%. Analysts say it may be too soon for Cisco to guide up for its fiscal year ending in July.

But UBS analyst Nikos Theodosopoulos says within Cisco, the push is to hit well above that.

"We believe internal target is in the 16%-19% year-over-year range," Theodosopoulos said in a research note.

One key indicator of Cisco's future performance will be its so-called book-to-bill ratio in the fiscal first quarter. If the rate of orders or bookings exceeds the rate of shipments, say a book-to-bill of greater than 1, it will be seen as a bullish sign for the business.

Theodosopoulos is looking for a book-to-bill ratio of 1, which he expects will give the company confidence in its outlook for the current quarter.

Wall Street is expecting sales to grow 3% sequentially from the fiscal first-quarter level.

Cisco shares are up 38% over the past year as investors followed a popular trend by piling into some of tech's steady performers. But given the ominous credit market worries and the squeeze on profits in the financial sector, any sign of jitters from Cisco could spoil that party a bit.