Will Cisco Earnings Move the Dow?

With hundreds of companies having reported quarterly results, we're now in the heart of earnings season. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed, knee-jerk decision.

Let's turn to Cisco Systems (CSCO 0.24%). The networking giant's 11.5% gain in 2012 outpaced the returns of the Dow Jones Industrial Average (^DJI 0.25%), and the company has come even further so far in 2013. Let's take an early look at what's been happening with Cisco over the past quarter and what we're likely to see in its quarterly report on Wednesday.

Stats on Cisco

Source: Yahoo Finance.

Will Cisco reconnect with investors this quarter?
Analysts have been fairly optimistic on Cisco lately, keeping their quarterly estimates stable but boosting full-year 2013 and 2014 earnings-per-share figures by $0.02 to $0.03. The stock has responded in kind, jumping more than 25% since early November.

Cisco's success lately owes to the turnaround of its core enterprise connectivity business. Between massive jumps in sales of wireless equipment and similar strength in video-networking gear and data centers, Cisco has done a good job of going beyond its core network-switching business to incorporate related higher-growth areas like cloud computing.

But other tech giants have made major moves to tap into the same trend toward offering complete solutions in a single package. Oracle's (ORCL -0.94%) purchase of Acme Packet (APKT) represents a big push by the software giant into networking, and some think Cisco should be worried that Oracle is trying to poach its space. Acme isn't a huge player, but Hewlett-Packard and other companies have also encroached on Cisco's traditional industry.

In response, Cisco is trying to refocus its efforts on its core business. Last month, it sold off its Linksys consumer-networking division to privately held Belkin in the latest admission that Cisco's consumer-facing products haven't fared as well as investors had hoped.

In its coming earnings report, watch for how Cisco CEO John Chambers guides investors for the current and coming quarters. Chambers has never hesitated to express extremely optimistic or pessimistic views based on current conditions, and the tenor of his comments could well be the most important factor in where the stock goes in the months ahead.

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