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 |
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% |
|
$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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