Cisco Systems (CSCO) reported earnings and revenue for the first quarter of fiscal 2020 that topped estimates, but the company’s outlook fell short of Wall Street targets. The Cisco earnings news sent shares in the computer networking giant tumbling on Thursday.
Cisco late Wednesday said adjusted earnings were 84 cents a share, with revenue rising 2% to $13.2 billion. A year earlier, Cisco earnings were 75 cents a share on sales of $13.07 billion.
Analysts expected Cisco earnings of 81 cents on sales of $13.09 billion for the period ended Oct. 31.
For the current October quarter, Cisco said it expects adjusted earnings of 76 cents. The company said it expects revenue to fall in a range of 3% to 5% from a year earlier. Analysts estimated earnings of 79 cents a share on sales of $12.77 billion, about 2.5% sales growth.
Cisco Stock: Sales Weakness Across The Board?
“Management noted that uncertainty has impacted business confidence and pointed to issues surrounding Hong Kong, Latin America, U.S.-China trade, and Brexit as significant overhangs,” RBC Capital analyst Robert Muller in a report.
Muller added: “If growth is non-existent this year, we believe that will likely be across the board and not a Cisco-specific issue.”
Cisco stock fell 7.3% to close at 44.91 on the stock market today.
Business Confidence: Corporate Spending Eases?
Cisco earnings have been viewed as an economic signal amid worries that corporate spending on technology will weaken as the U.S.-China trade war drags into 2020.
Jefferies analyst George Notter said in a report: “Cisco pointed to a mixture of factors driving uncertainty among end customers — a U.S./China Trade War; Brexit; Latin American weakness, a pending election year, and conflict in Hong Kong among other items. These issues are showing up in Cisco business as elongated deal closures and scaled down or deferred projects. Product orders declined 4% year-over-year.”
In August, Cisco earnings guidance issued at the time for the first quarter missed Wall Street targets. The company cited lower spending by telecom customers and slowing sales in China. Cisco rival Arista Networks (ANET) on Nov. 1 issued guidance that missed expectations.
In addition, Cisco has shifted away from its core business of selling network switches and routers. With acquisitions, Cisco has aimed to increase revenue from software and services. Further, sales of new Catalyst 9000 network switches have been a bright spot.
SOURCE : https://www.investors.com/news/technology/cisco-earnings-csco-cisco-stock-q32019/
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