Sunday, July 24, 2011

Cisco Reports Quarterly Earnings on Wednesday, August 10 (Financial Charts) *Financial Performance Review* CSCO

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Cisco will report QE July 2011 financial results on Wednesday, August 10

* Update 1 on 8-7-11 *

Cisco Financial Performance Review

Cisco will be reporting QE July 2011 financial results on Wednesday, August 10, after market close. The conference call will be at 1:30 p.m. PT.

Cisco financial performance charts for prior quarters have been posted on the Cisco Financial Performance page along with additional commentary and will be updated for this next quarterly report. The charts are also lower in this post.

The Cisco financial performance charts are:
Cisco Performance by the Quarters
Earnings per Share (Diluted)
Cash Flow per Share from Operations (Diluted)
Total Revenues, Operating Income, Net Income
Gross Margin, Operating Margin, Net Margin
Return on Assets
Total Revenues and Earnings per Share Growth Rates
Revenue Sources
Geographic Revenues
Operating Expense Ratio

Cisco Future and Past Financial Performance

Earnings per Share
Yahoo Finance analysts' estimates QE July 2011: $0.38 average, $0.36 low, $0.41 high, 38 analysts
Prior Quarter QE April 2011: $0.33
Prior Year QE July 2010: $0.33
Cisco did not provide guidance, except for workforce reduction restructuring charges noted below
The analysts' average Earnings Per Share estimate for QE July 2011 is $0.38, which is a +15% increase QoQ from QE April 2011 EPS of $0.33 and also a +15% increase YoY from QE July 2011. This appears a very positive estimate and would be a multi-year high. 

Total Revenues
Yahoo Finance analysts' estimates QE July 2011: $10.98B average, $10.84B low, $11.16B high, 37 analysts
Prior Quarter QE April 2011: $10.87B
Prior Year QE July 2010: $10.84B
Cisco did not provide guidance
The analysts' average Total Revenues of $10.97B is a positive estimate and would be a multi-year high

Workforce Reduction, July 18, 2011
Cisco will layoff 6,500 employees and incur cash-based restructuring charges, consisting of severance and other one-time termination benefits, estimated at $1.3 billion over several quarters. Cisco estimates approximately $750 million of these charges will be incurred in QE July 2011, including approximately $500 million relating to the voluntary early retirement program. The remaining estimated $550 million of charges will be recognized in the subsequent 4 quarters, beginning with QE October 2011. Cisco Announces Additional Detail on Comprehensive Action Plan

Prior QE April 2011 Financial Results
When Cisco reports QE July 2011, the 3 months ended July, financial results on August 10, Cisco is expected to miss or match various QE April 2011 results. These financial results are charted on the Cisco Financial Performance page. Cisco for QE April 2011, the 3 months ended April, financial results were:
Total Revenues $10.87B
Operating Income $2.18B
Net Income $1.81B
Earnings per Share $0.33
Gross Profit Margin 61.28%
Operating Income Margin 20.09%
Net Income Margin 16.63%

Cisco's announcement of the workforce reduction restructuring charges on July 18, 2011 lowered financial performance expectations. QE July 2011 financial results should still at least match QE April 2011 in some areas. For QE July 2011, Cisco should match QE April 2011 on Total Revenues and miss on Net Income and Earnings per Share mostly because of the restructuring charges. Depending on where the restructuring charges are recorded, Cisco will meet or miss on Operating Income. Cisco should be close to, and perhaps beat, on Gross Profit Margin. Operating Income Margin and Net Income Margin will be lower due to the restructuring charges. These margins are already lower than the historical range. The detailed quarter by quarter charts are on the Cisco Financial Performance page.

Cisco Financial Performance by the Quarters (Charts)

Cisco Earnings Per Share Below is a chart of quarterly earnings per share. Current Earnings per Share of $0.33 is up +22% QoQ and down -11% YoY. The recent peaks have been the QE October 2008 and QE April 2010 at $0.37. The low has been $0.19 for QE July 2009.

Cisco Cash Flow per Share Below is a chart of cash flow from operations per share. Cisco has a very striking cash flow cycle on the chart. Current Cash Flow per Share of $1.31 is strong. The peaks have been QE July 2009 of $1.65 and QE July 2010 of $1.76. The lows have been QE October 2009 of $0.25 and QE October 2010 of $0.25.

Cisco Total Revenues, Operating Income, and Net Income Below is a chart of quarterly total revenues, operating income, and net income. Current Total Revenues of $10.87B is a multi-year high, up +19% QoQ and +5% YoY. Total Revenues have been amazingly consistent and over $10B for 5 consecutive quarters, with small increases or decreases. Current Operating Income of $2.18B is a rebound from prior QE January 2011 of $1.68B but below prior QE October 2010 of $2.35B. Lower gross profit margins have kept the past 2 quarters below the historical $2.3B area. Net Income of $1.81B is the same scenario as Operating Income and the past 2 quarters are below the historical $1.9B+ area.

Cisco Gross Margin, Operating Margin, and Net Margin Below is a chart of quarterly gross margin, operating margin, and net margin. Current Gross Margin of 61.28% is an increase QoQ but still continues below the historical 62% area. Current Operating Margin of 20.09% is also an increase QoQ but also cotinues below historical range of 21+%. Current Net Margin of 16.63% is also is an increaase QoQ  but also continues below the historical range of 17+%. The decreased gross margin has also pulled down the operating and net margins.

Cisco Return on Assets Below is a chart of annual return on average assets per quarter. The total net income for the most recent 4 quarters is divided into average assets for the most recent 4 quarters to obtain a rolling annualized ROA, an annualized return on average assets for the 12 months (4 quarters) ended. Cisco has a historically low ROA for a technology company and the ROA is decreasing. Current Return on Assets of +8.82% is well below the QE July 2010 of 10.39%. ROA is decreasing because net income is relatively stable while total assets is increasing.

Cisco Growth Rates Below is a chart of the quarterly (QoQ, Q/Q, quarterly change) growth rates for total revenues and earnings per share. Current Total Revenues of +4.41% are the first increase after 2 consecutive quarterly decreases. Total revenues have not been volatile, ranging from -3.19% to +8.80% on the chart. Current Earnings per Share of +22.22% reverses the prior QE January 2011 plunge of -21.59%. Earnings per share have decreased 2 of the past 4 quarters, but have been most volatile until the past 2 quarters.

Cisco Revenue Sources Below is a chart of quarterly revenue sources, as a percentage of total revenues. The recent trend has been relatively stable. The overall trend is a decrease in Switches offset by increase in New Products, which have merged on the chart plus a decrease in Service offset by an increase in Routers.

Cisco Geographic Revenues Below is a chart of quarterly geographic revenues, as a percentage of total revenues. For the current quarter, U.S. and Canada revenues were $5.8B and 53% of total revenues. Europe was $2.2B and 21%, Emerging Markets were $1.3B and 12%, and Asia Pacific was $1.6B and 15%. The overall trend is a decrease in U.S. and Canada, an increase in Europe, an increase in Emerging Markets, and a decrease in Asia Pacific.

Cisco Operating Expense Ratio Below is a chart of quarterly operating expense ratio, which is operating expenses divided by total revenues. The current Operating Expense Ratio of 41.19% is below average and at the lower end of the historical range, indicating an increased efficiency plus a higher proportion of revenues is reaching the bottom line, net income.

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