Cisco's Q4 Was Strong And Guidance 'Good Enough'

Cisco Systems, Inc. (NASDAQ: CSCO) reported robust Q4:FY16 results, with “excellent” margin performance. Drexel Hamilton’s Brian J. White maintained a Buy rating on the company, with a price target of $36.

White mentioned that the guidance was “good enough,” given the current IT spending environment.

“We continue to believe Cisco's stock has an upward bias, especially given its 3.4 percent dividend yield, attractive valuation, margin execution story and expanding market reach with higher levels of software,” the analyst went on to say.

Related Link: Cisco Systems To Cut Up To 5,500 Positions, Issues Q1 2017 Guidance

Q4 Results

For Q4, Cisco Systems reported sales of $12.64 billion, ahead of the estimate and the consensus, with pro forma EPS of $0.63, again ahead of expectations.

According to the Drexel Hamilton report, “Once again, Cisco executed extremely well in the margin department this quarter. Furthering this effort, Cisco announced a restructuring plan to eliminate 5,500 positions or approximately 7 percent of the company's workforce.”

The company reported gross margin of 64.6 percent, ahead of the estimate, with operating margin of 31.4 percent, also well ahead of the estimate and the highest since Q2:FY06.

The operating profit of $3.97 billion was meaningfully above the estimate and Cisco Systems generated operating cash flow of $3.8 billion during Q4.

Q1 Guidance

For Q1:FY17, the company guided to sales of down 1 percent to up 1 percent year-on-year, below the consensus forecast, with pro forma EPS of $0.58-$0.60, with the high end in-line with the consensus.

Cisco Systems also guided to operating margin of 29-30 percent.

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