Cisco Results Top Estimates

(RTTNews) - Cisco Systems, Inc. (CSCO), the world's largest computer networking gear maker, said Wednesday after the markets closed that its fourth quarter profit rose 3.2% from last year, helped by higher revenue and improved gross margin.

The company's quarterly earnings per share, excluding items, also came in above analysts' expectations as did its quarterly revenue.

"I'm stepping into the CEO role at an incredibly exciting time for Cisco. We closed out our fiscal year with record revenues and record non-GAAP EPS, for both Q4 and FY15. I'm particularly pleased with the strong growth of deferred revenue which shows we are very effectively driving our business to a more predictable software-based business model, at the same time as growing revenues and earnings," said Chuck Robbins, Cisco chief executive officer.

Cisco shares are currently gaining 3.76% in after hours trading after closing the day's regular trading session at $27.90, down 12 cents. The shares trade in a 52-week range of $22.49 to $30.31.

Robbins took over the reigns of the company from John Chambers last month. Chambers, who had been the company's CEO since 1995, remains as executive chairman.

Cisco is aggressively pursuing the acquisition-led growth strategy, diversifying its business and entering consumer markets. At the same time, the company is shedding its nonperforming businesses. Last month, Cisco agreed to sell the client premises equipment portion of its Service Provider Video connected devices unit to French-based Technicolor for about $600 million in cash and stock.

Cisco is viewed as a technology-industry bellwether because it dominates the market for routers and switches. Since the company's latest results are for the full month of July, instead of June for many of the technology giants, they are also seen as an early indicator of industry trends.

For the fourth quarter ended July 25, 2015, the San Jose, California-based company reported net income of $2.3 billion or $0.45 per share, compared to $2.2 billion or $0.43 per share for the year-ago quarter.

Excluding items, adjusted net income for the fourth quarter was $3.0 billion or $0.59 per share, compared to $2.8 billion or $0.55 per share in the prior year quarter.

On average, 34 analysts polled by Thomson Reuters expected the company to earn $0.56 per share for the fourth quarter. Analysts' estimates typically exclude special items.

For Cisco, this marks the third consecutive quarter of year-over-year profit growth following five quarters of declines. The company had been struggling with rising costs that threatened to derail its earnings growth. To reduce costs, the company cut thousands of jobs.

Gross margin for the quarter improved to 60.2% from 59.9% a year earlier.

Cisco, which makes the routers and switches that direct computer and telecommunications traffic over corporate networks and the Internet, said total revenue for the fourth quarter rose 3.9% to $12.84 billion from $12.36 billion in the same quarter last year. Thirty-three analysts had a consensus revenue estimate of $12.65 billion for the fourth quarter.

Americas revenue was up 7%, while both EMEA and APJC were flat.

Product revenue for the quarter increased 4% to $9.9 billion, while service revenue grew 3.8% to $2.9 billion.

During the fourth quarter, Cisco repurchased about 35 million shares of common stock for an aggregate purchase price of $1.0 billion. The remaining authorized amount for stock repurchases as of July 25 was about $4.3 billion with no termination date.

Cisco's balance sheet looks rock solid. The company ended the fourth quarter with cash and cash equivalents and investment of $60.4 billion, compared with $54.4 billion at the end of the prior quarter and $52.1 billion a year ago.

Looking forward to the first quarter, Cisco forecasts revenue growth of 2% to 4% and adjusted earnings of $0.55 to $0.57 per share. Analysts currently expect the company to earn $0.56 per share on revenue growth of 2.50% for the first quarter.