Tonight, networking infrastructure powerhouse Cisco Systems (NASDAQ:CSCO) will report earnings for Q1 2007. One Fool is here to present the lay of the land going into the report.

What analysts say:

  • Buy, sell, or waffle? Out of the whopping 32 analysts following Cisco, 26 rate the stock a buy. Five are holding the line, and a lone voice says "sell!"
  • Revenues. Revenues of $7.9 billion would satisfy the average analyst, up 20.6% from last year's $6.55 billion.
  • Earnings. As for net earnings, the consensus forecast calls for $0.29 per share, up from $0.25 a year ago.

What management says:
CEO John Chambers has an admirably long-term strategic view. He also explicitly likes to give investors a transparent view of the company. In the latest earnings call, he put it thusly: "We will always try to share with our shareholders, in a very transparent way, both our reasons for optimism and occasional caution. Going into Q4, we did share some caution and this concern appears to be appropriate, at least on a macro and general technology spending level."

The challenges to which he alludes are largely macroeconomical and outside the company's control, such as global economic growth and the need for networking infrastructure upgrades around the world. For those areas that Cisco can control, Chambers believes that "our vision, strategy and execution are in great shape entering fiscal year 2007."

What management does:
What happened to the net margins over the past six months? Meet an old friend: stock-based compensation expensing. If you add the $1.05 million of such costs back into earnings, you get a pro forma net margin of 23.3% for the past year. On an apples-to-apples basis, I'd call Cisco's margins remarkably stable -- and juicy.

Margins %

4/05

7/05

10/05

1/06

4/06

7/06

Gross

67.3

67.2

67.2

67.4

67.3

66.4

Op.

30.0

30.0

28.6

27.7

29.4

28.8

Net

23.1

23.1

22.1

21.5

20.6

19.6
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
This is one of those companies whose stock I'd buy in a heartbeat if I could only stop writing about it long enough. I'll get you, Foolish trading guidelines!

There is a lot to like here. Honest and transparent management with a long-term strategy is No. 1 on my list, and the ambition to power entertainment centers across America -- and then the world -- clocks in next. You can't argue with the results, or with Cisco's stature in the marketplace, and you can't even level the old accusations of shareholder-unfriendly stock dilution against the company anymore. The share count has dropped 6.8% in the past 18 months.

Tonight, Cisco should stay close to its guidance, and hence, to analyst expectations. Management likes to keep the markets updated, and there have been no earth-shattering announcements of late. Business as usual, and the train keeps on rolling.

Competitors:

  • Siemens AG (NYSE:SI)
  • Hewlett-Packard (NYSE:HPQ)
  • Hitachi (NYSE:HIT)
  • Johnson Controls (NYSE:JCI)
  • Nortel Networks (NYSE:NT)
  • Lucent Technologies (NYSE:LU)

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Fool contributor Anders Bylund holds no position in any of the companies discussed here. Darn it. You can check out Anders' holdings if you like, and Foolish disclosure is always state-of-the-art.