Cisco Systems Inc shares are trading lower premarket today after the company issued below-consensus third-quarter and FY24 adjusted earnings per share (EPS) and sales guidance. In addition, the company recently disclosed a reduction in its workforce.
Cisco Systems, a multinational technology conglomerate, is a leading provider of networking solutions. The company’s products and services enable the smooth functioning of networks and the exchange of information between devices and systems. However, Cisco’s recent financial outlook has dampened investor sentiment.
The company’s guidance for third-quarter revenue is in the range of $12.1 billion to $12.3 billion, falling short of analysts’ expectations of $13.09 billion. Similarly, Cisco’s adjusted EPS for the same quarter is projected to be between $0.84 and $0.86, compared to the estimated $0.92. These figures indicate a potential slowdown in the company’s growth.
Furthermore, Cisco’s full-year 2024 revenue guidance of $51.5 billion to $52.5 billion is lower than the estimated revenue of $54.26 billion. Similarly, the company’s adjusted EPS for the fiscal year is expected to be in the range of $3.68 to $3.74, compared to the street view of $3.86. These figures suggest that Cisco may face challenges in achieving its long-term growth targets.
To address these challenges, Cisco plans to reduce its global workforce by approximately 5%. This decision will result in pre-tax charges of approximately $800 million. While this move may help the company control costs, it raises concerns about the impact on employee morale and the overall efficiency of the organization.
Despite the disappointing guidance, Cisco reported better-than-expected second-quarter results. The company’s adjusted EPS of $0.87 exceeded the analyst consensus estimate of $0.84. Additionally, Cisco’s sales for the quarter amounted to $12.79 billion, surpassing the estimated $12.71 billion. These positive results indicate that Cisco’s core business continues to perform well.
In an effort to appease investors, Cisco announced a 3% increase in its quarterly dividend per share, bringing it to $0.40. The dividend will be payable on April 24, 2024, to all stockholders of record as of April 4, 2024. This move reflects the company’s commitment to returning value to its shareholders.
The stock market has reacted negatively to Cisco’s guidance, with shares trading down 2.17% at $49.19. Investors are concerned about the company’s ability to sustain growth and meet its financial targets. However, it is important to note that stock prices are influenced by multiple factors and can fluctuate based on market sentiment.
In conclusion, Cisco’s below-consensus guidance for the third quarter and FY24, along with the disclosure of a workforce reduction, has led to a decline in the company’s stock price. While the company’s second-quarter results were better than expected, investors remain cautious about Cisco’s future prospects. It will be crucial for Cisco to address the challenges it faces and demonstrate its ability to adapt to changing market conditions.
