Resilience in a Downturn - What can the Earnings Tell Us About Cisco Systems, Inc. (NASDAQ:CSCO)

• Average price target set at $53.8.
• Cisco surprised on revenues, growth revitalization and business resilience. Easing of supply pressures expected to help the company grow.
• The company is a good fundamental all-rounder, and potentially a great dividend candidate.

Cisco Systems, Inc. (NASDAQ:CSCO) posted the latest Q4 and full year results, and the stock has jumped 6% intraday. With the growth revitalization and earnings beat, Cisco may be faring even better than expected in the industry. The company seems to have shown resilience against economic pressures and is positioned to capture value as supply pressures are loosened.

We also checked analysts' price targets, and it seems that the large $204b cap stock now has an average target of $53.79.

Explore our latest analysis on Cisco Systems!

Earnings Recap

Management emphasized the easing of supply chains as drivers for top line growth:  "We expect strong performance across our portfolio, driven by our continued focus on innovation and easing of supply constraints to drive solid top-line growth and profitability."

They also noted that they increasingly expect growth from their software segment in conjunction with their equipment sales, "Long-term megatrends like hybrid cloud, hybrid work, security, IoT, 400-gig and beyond, 5G, and WiFi 6, as well as the move toward application observability, will likely provide tailwinds to our growth."

Looking at their full year report and investor relations site, it seems that the company is priming their traditional dividend-seeking investors for the future software pivot and are creating campaigns to promote the importance of SaaS metrics such as Annual Recurring Revenue (ARR) and Remaining Performance Obligations (RPO). In addition to these metrics, investors that want to follow subscription services may benefit from looking into analysts revenue forecasts, which already price-in future obligations.

Quarterly earnings results

• Revenue came in at $13.1b, flat from a year ago. Beat estimates of $12.88b by 17%.
• Net income at $2.8b, down 6% YoY.
• Diluted EPS came at $0.68, down 4% YoY. 

Full year results

• $52.6b in revenue, up 3% from last year.
• $11.8b in net income, representing a 22.4% profit margin, up 12% YoY.
• $2.82 diluted EPS, up 13% from $2.5 in 2021.

Outlook

• Expected 2023 sales growth of 4% to 6%
• GAAP EPS $2.77 to $2.88, Non-GAAP EPS $3.49 to $3.56

What This Means For You

Cisco has positively surprised on the fundamentals, and the market seems to have reacted accordingly. Investors now may have a bit more confidence in the stability and resilience of the large cap.

Cisco is also a popular stock among dividend investors, and as the company increases in profitability, investors will expect management to keep increasing the dividends per share. If you are a dividend investor, you can review our analysis for Cisco's dividend capacity. The company also bought back stock equivalent to around 3.2% of market capitalization this year.

Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.

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Simply Wall St analyst Goran Damchevski and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.