being a prettier house in a bad neighborhood isn’t enough.
That was particularly so on a day like Wednesday, which saw the stock market rattled over recession fears sparked by an inverted yield curve. Cisco’s fiscal fourth-quarter results, posted after the closing bell, came in ahead of Wall Street’s forecasts and reflected the network equipment giant’s best year of growth since 2013. But Cisco’s forecast for the current quarter was a bit below expectations, knocking a stock that had already shed 4% during the regular session down another 7% after hours.
Cisco’s outlook wasn’t as bad as many feared, especially considering the bleak picture painted by peer
less than two weeks ago. In a preannouncement of its own results, the provider of enterprise data-storage systems cited a “meaningful deceleration” in business spending on high-tech gear. That slowdown was enough for NetApp to flip its projection from single-digit growth for its current fiscal year to a 5% to 10% drop in revenue. Cisco doesn’t give full-year forecasts, but the company said it expects revenue growth of flat to up 2% year over year for the current quarter. Analysts had been expecting 3% growth.
It helps that Cisco is strong in the right places. Analyst Simon Leopold of Raymond James notes that the company has less direct exposure to the more challenged markets of storage and servers than many of its peers. And Cisco has steadily been expanding its security and software business lines that have better growth prospects ahead.
But with such a broad global business, Cisco isn’t immune to global economic woes. Chief Executive Officer
said on Wednesday’s earnings call that the company did see some “slight early indications of some macro shifts” in the month of July that it didn’t see in the prior quarter. That could eventually derail Wall Street’s hopes for a continued streak by the company, with revenue expected to grow 3% annually over the next two fiscal years.
In a fearful market, Cisco’s numbers just weren’t comforting.
Write to Dan Gallagher at email@example.com
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