Cisco Stock Struggles Despite Earnings Beat, Strong Outlook

(Image credit: Joan Cros/NurPhoto via Getty Images)

Cisco Systems (CSCO) stock traded lower Thursday even after the networking equipment specialist's beat-and-raise quarter.

In the three months ended April 27, Cisco's revenue decreased 13% year-over-year to $12.7 billion and its earnings per share (EPS) slumped 12% to 88 cents. The company closed its acquisition of Splunk during the quarter, helping its total annualized recurring revenue increase 22% year-over-year to $29.2 billion.

"We delivered a solid Q3 performance in what remains a dynamic environment," said Cisco CEO Chuck Robbins in the press release. "Our unique ability to bring together networking, security, observability, and data enables Cisco to offer our customers unrivaled digital resilience for the [artificial intelligence] AI era."

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The company's results easily beat analysts' expectations. According to CNBC, Wall Street was anticipating revenue of $12.5 billion and earnings of 82 cents per share.

As a result of its better-than-expected fiscal third-quarter results, Cisco increased its revenue guidance for the fiscal year. It now expects revenue in the range of $53.6 billion to $53.8 billion, up from its previous range of $51.5 billion to $52.5 billion.

It also narrowed its earnings forecast for the full year, now anticipating earnings in the range of $3.69 to $3.71 per share, compared with its prior estimate for earnings of $3.68 to $3.74 per share.

Cisco's new outlook satisfied analysts' expectations. According to Yahoo Finance, Wall Street expects Cisco to report fiscal 2024 revenue of $53.1 billion and EPS of $3.67.

Lastly, Cisco declared a quarterly dividend of 40 cents per share, payable on July 24 to shareholders of record at the close of business on July 5. CSCO is one of the best dividend stocks on Wall Street, having raised its annual payout 12 years in row. Most recently, the company hiked its quarterly dividend by 3% in February.

Is Cisco stock a buy, sell or hold?

Although Cisco Systems is one of the Dow Jones stocks that is lower on a year-to-date basis, analysts are still very bullish on it. According to S&P Global Market Intelligence, the consensus analyst target price for CSCO stock is $54.07, representing implied upside of roughly 12% to current levels. Meanwhile, the consensus recommendation is Buy.

Financial services firm Oppenheimer is one of those bullish outlook toward Cisco, as evidenced by its Outperform (Buy) rating on the blue chip stock. Additionally, it has an above-consensus price target of $58, representing implied upside of about 20% to current levels.

Despite inventory issues that will likely pressure networking revenue through the end of this calendar year, the company's fiscal third-quarter results were "solid" and provided "early indications of a bottom in networking demand," Oppenheimer analyst Ittai Kidron wrote in a May 15 report.

"In addition, the company identified multiple tailwinds that can drive a reacceleration in growth for fiscal 2025," Kidron said, including AI and Splunk. "Still, the company will need to execute on its initiatives, and many of the benefits will take time to flow through."

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.