Predictable Greatness From Cisco: Fool by Numbers

On Aug. 7, networking mastodon Cisco Systems (Nasdaq: CSCO  ) released fourth-quarter 2007 earnings for the period ending July 28.

  • It's another predictably great quarter with strong sales and profit growth, stable income margins, and more cash generation than GAAP profits.
  • Few companies other than large banks can claim to have more cash than Microsoft (Nasdaq: MSFT  ) , but Cisco is one of them. Heck, the company is making a run at ExxonMobil (NYSE: XOM  ) and its $30 billion cash-on-hand balance. Net of debt, Microsoft is the only non-financial U.S. company that can match Cisco*. So what is the plan for all that moola?
  • You might expect inventory levels to rise about as quickly as revenues, but you'd be wrong this time. Most of the inventory components did behave as expected, except work in process which dipped from $377 million a year ago to only $45 million today. That's on purpose, and the effect of moving to a "lean manufacturing model" to speed up inventory turns.

*Says a Capital IQ screen for $16 billion or more in cash minus long-term debt, excluding the financial sector. Only two results, match.

(Figures in millions, except per-share data)

Income Statement Highlights

Q4 2007

Q4 2006

Change

Sales

$9,433

$7,984

18.1%

Net Profit

$1,930

$1,544

25%

EPS

$0.31

$0.25

24%

Diluted Shares

6,275

6,187

1.4%

Get back to basics with the income statement.

Margin Checkup

Q4 2007

Q4 2006

Change*

Gross Margin

64.3%

64.4%

(0.1)

Operating Margin

24.4%

24.9%

(0.5)

Net Margin

20.5%

19.3%

1.1

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets

Q4 2007

Q4 2006

Change

Cash + ST Invest.

$22,266

$17,814

25%

Accounts Rec.

$3,989

$3,303

20.8%

Inventory

$1,322

$1,371

(3.6%)

Liabilities

Q4 2007

Q4 2006

Change

Accounts Payable

$786

$880

(10.7%)

Long-Term Debt

$6,408

$6,332

1.2%

The balance sheet reflects the company's health.

Cash Flow Highlights

Q4 2007

Q4 2006

Change

Cash From Ops.

$2,738

$2,317

18.2%

Capital Expenditures

$339

$177

91.5%

Free Cash Flow

$2,399

$2,140

12.1%

Owner Earnings

$2,263

$1,804

25.4%

Free cash flow is a Fool's best friend.

Related Foolishness:

Microsoft is aMotley Fool Inside Value recommendation. Learn how to buy a $20 wallet with $50 inside at the capable hands of Philip Durell and his value hounds, absolutely free for 30 days.

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, Fool contributor Anders Bylund had no position in any company mentioned, but he wanted to. Fool rules are here, and they're keeping him from buying what he talks about all the time.


Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 533558, ~/Articles/ArticleHandler.aspx, 4/20/2014 12:13:30 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement