Tomorrow, Cisco Systems (NASDAQ:CSCO) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings 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, kneejerk reaction to news that turns out to be exactly the wrong move.

Cisco is one of the newest members of the Dow Jones Industrials (DJINDICES:^DJI), but it has largely struggled in its time in the average, just barely gaining any ground since its 2009 admission. Lately, though, investors have started to see the networking giant as a legitimate value play. 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.

Stats on Cisco

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$12.18 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will Cisco keep moving forward this quarter?
In recent months, analysts have stayed fairly steadfast in their views on Cisco's earnings, keeping their estimates for the April quarter unchanged but adding $0.03 per share to their full-year fiscal 2013 calls. The stock has behaved similarly, with a gain of less than 2% since early February.

Like many tech giants, Cisco has been in the process of transforming itself from a focused networking specialist to a broad-based IT powerhouse. That strategic decision has opened up a world of new opportunities for the company, but it has also left Cisco vulnerable to competitors in its core router business.

Still, arguably the bigger concern is weakness in IT spending overall. In early April, Cisco fell in sympathy when F5 Networks (NASDAQ:FFIV) announced that it expected first-quarter sales to fall well short of analyst expectations, as revenue from both government spending and the telecommunications industry was particularly weak. Cisco has done its best to emphasize the virtual cloud-computing side of its business with its software-defined data center area, but as rivals gravitate toward the tech segments with higher growth potential, Cisco will have to work hard to catch up and surpass the head-starts that better-established companies in the space already have.

One unexpected positive piece of news for Cisco came in March, when it won a court battle against VirnetX (NYSEMKT:VHC). A jury finding that Cisco hadn't infringed on any VirnetX patents potentially saved Cisco hundreds of millions of dollars in damages or settlement payments, despite the fact that most analysts had expected VirnetX to win as it had in previous cases with similar facts. VirnetX still has remedies to pursue, but the news puts Cisco in a strong position going forward.

In Cisco's quarterly report, watch not just for how strong or weak the company's sales are but also where those sales are specifically coming from. By identifying pockets of strength in a generally sluggish tech environment, you should be able to decide whether Cisco has what it takes to accelerate its growth and get its earnings multiple back up to more typical levels.

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