Cisco Cracks Up: Fool by Numbers
By
Anders Bylund
November 8, 2007
|
On Nov. 7, networking giant Cisco Systems (Nasdaq: CSCO) released first-quarter 2008 earnings for the period ended Oct. 27, 2007.
- You may have noticed that Cisco's stock price dropped more than 6% this morning, erasing approximately over $10 billion of its market cap. Whatever the reason, the company beat sales and earnings estimates. Pro forma EPS was $0.40 vs. the $0.36 target, so these numbers can't be blamed.
- Seen another way, the drop canceled about three months' worth of gains.
- Cisco widened every important margin, and all cash flows were fatter than the GAAP net profit.
- The share count was just about the only thing moving in the wrong direction. Cisco took on a tiny bit more debt, too, but the cash balance increase easily makes up for that.
(Figures in millions, except per-share data)
Income Statement Highlights
|
Q1 2008
|
Q1 2007
|
Change
|
|
Sales
|
$9,554
|
$8,184
|
16.7%
|
|
Net Profit
|
$2,205
|
$1,608
|
37.1%
|
|
EPS
|
$0.35
|
$0.26
|
34.6%
|
|
Diluted Shares
|
6,330
|
6,199
|
2.1%
|
Get back to basics with the income statement.
Margin Checkup
|
Q1 2008
|
Q1 2007
|
Change*
|
|
Gross Margin
|
64.6%
|
63.9%
|
0.7
|
|
Operating Margin
|
24.8%
|
24.3%
|
0.5
|
|
Net Margin
|
23.1%
|
19.7%
|
3.4
|
*Expressed in percentage points.
Margins are the earnings engine.
Balance Sheet Highlights
|
Assets
|
Q1 2008
|
Q1 2007
|
Change
|
|
Cash + ST Invest.
|
$24,679
|
$19,520
|
26.4%
|
|
Accounts Rec.
|
$3,418
|
$3,417
|
0%
|
|
Inventory
|
$1,315
|
$1,477
|
(11%)
|
|
Liabilities
|
Q1 2008
|
Q1 2007
|
Change
|
|
Accounts Payable
|
$820
|
$869
|
(5.6%)
|
|
Long-Term Debt
|
$6,582
|
$6,455
|
2%
|
The balance sheet reflects the company's health.
Cash Flow Highlights
|
Q1 2008
|
Q1 2007
|
Change
|
|
Cash From Ops.
|
$3,089
|
$2,271
|
36%
|
|
Capital Expenditures
|
$296
|
$214
|
38.3%
|
|
Free Cash Flow
|
$2,793
|
$2,057
|
35.8%
|
|
Owner Earnings
|
$2,330
|
$1,742
|
33.8%
|
Free cash flow is a Fool's best friend.
Competitive Context
|
Market Cap
|
Trailing P/E Ratio
|
CAPS Rating
|
|
Cisco
|
$188,630
|
26.4
|
*****
|
|
Nokia (NYSE: NOK)
|
$156,220
|
16.7
|
*****
|
|
Juniper Networks (Nasdaq: JNPR)
|
$16,970
|
61.9
|
***
|
|
Nortel Networks (NYSE: NT)
|
$8,120
|
NM
|
*
|
|
CIENA (Nasdaq: CIEN)
|
$4,000
|
64.8
|
***
|
Using the latest reported numbers from Capital IQ, a division of Standard & Poor's.
Keep your partners close and the competition in your vest pocket.
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