Cisco ( $CSCO ) Cheat Sheet – 2Q:2009

Cisco reports tonight.  Here’s the quick and dirty consensus:

	Q2-Jan.09	Q3-Apr.09	Q4-Jul.09	FY-Jul.09
Income Statement
Revenue	9089.00	8072.13	8263.97	35749.33
Gross Margin (%)	64.02	63.01	63.20	64.01
EBIT	2298.00	1774.37	1874.52	9024.89
Operating Profit	2298.00	1782.33	1933.24	9006.63
EBITDA	2533.00	2214.37	2314.52	10284.96
Pre-tax Profit	2393.00	1866.04	2013.14	9388.52
Net Income	1867.00	1459.54	1578.08	7354.83

And an earnings preview (cribbed from an alert service):

Company is scheduled to report third quarter results tomorrow after the market closes. Reuters is $0.25/$8.13B; guidance was for a revenue decline of 15-20% y/y, implying a range of $7.83-8.32B. The Street is generally looking for an in-line quarter, though several previews note the potential for modest EPS upside even if the top line were to be light. Order trends will be a focus to see if the company has experienced the relative stability over the past 6-8 weeks that has been referenced by many tech peers throughout earnings season. Margins and expense controls will also be closely watched as the company is expected to have managed costs well in the muted demand environment. Consensus (10-15 estimates) for selected metrics:

• Product revenue $6.46B
• Services revenue $1.63B
• Non-GAAP gross margin 63.2%; guidance was for 63%

As is typically the case, guidance and Chambers' comments that frame the outlook will likely dictate the market's reaction. Gauging expectations is more difficult than usual this quarter as while there are no calls for upside proper, several previews note that current consensus for a 2% sequential increase is very beatable heading into the strong fourth quarter; further, there were several out-quarter estimate bumps included in the deluge of previews. In sum, while upside is not necessarily "expected" in this environment, anything less than bracketing the consensus along with relatively constructive comments about the environment from Chambers may be viewed as a disappointment. Given CSCO's wide footprint, geographical breadth, Chambers' willingness to provide details and its spot at the front of April-reporting companies, tomorrow's call could potentially go a long way toward dictating tech sentiment over the near term.

I don’t like Cisco at 15* estimates of $1.25 for this year.  They’re shrinking and the stock is trading at the upper end of the company’s “12-15% long-term growth rate” guidance, which is total garbage too and needs to come down.  Very well managed company… likely to do a large acquisition at some point.  Too much of a macro buy tech kind of bet for me… which is probably exactly why its working.  Macro calls are driving this market.