Earnings Outlook: Cisco report on tap following big run-up

SAN FRANCISCO (MarketWatch) � Cisco Systems is expected to post modest sales gains and relatively flat earnings growth Wednesday afternoon, despite bullish investor views that have driven the stock up nearly 25% since the company�s last report.

Cisco Cisco CEO John Chambers.

Cisco is due to report results for its second fiscal quarter after the closing bell, and analysts are expecting adjusted earnings of 48 cents a share on revenue of $12.07 billion.

Those estimates are on the high side of Cisco�s own forecast, given during its last earnings report on Nov. 13. For the year-earlier period, the company reported a profit of 47 cents a share on revenue of $11.53 billion.

�Cisco�s no longer a big-growth company, yet the earnings outlook is improving,� Mark Sue of RBC Capital wrote in a note to clients Monday, adding that, �with concerns related to technology displacement likely to dissipate, replaced instead with new data-center and wireless initiatives, the stock�s multiple may decompress.�

Sue maintains an outperform rating and $24 price target on Cisco. His target implies a 14% upside for the stock, which closed Tuesday trading at $20.97.

Cisco�s shares have surged since the company surprised investors in its last report on Nov. 13. The company beat Wall Street�s estimates for the period, and its in-line forecast was a positive surprise against more downbeat sentiment. Read: Cisco bounces back on earnings surprise

/quotes/zigman/20039/quotes/nls/csco CSCO 20.97, -0.30, -1.41% /quotes/zigman/3870025 SPX 1,519.43, +2.42, +0.16%

The stock had surged more than 25% from that report until it hit a fresh two-year closing high on Monday of $21.27. The stock slid back about 1.4% during Tuesday�s session.

That run-up has made some on Wall Street nervous. Rod Hall of J.P. Morgan downgraded Cisco to an underperform rating on Jan. 17, when the stock was just below the $21 mark. In a note Monday, he maintained his view that a tough economy this year would challenge the company.

�Short-term performance will likely hinge on [Chief Executive Officer] John Chambers� commentary on enterprise spending, but we continue to see plenty of enterprise spending risk in 2013 as the macro environment remains very fragile,� Hall wrote to clients.

Chambers is expected to lead a conference call Wednesday afternoon to share his outlook for the business.

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Wall Street is heavily bullish on Cisco despite its recent run-up. About 71% of the 41 brokers covering the stock rate the shares as a buy, according to Thomson Reuters. The current median price target on the shares is $24.

Kevin Dennean of Citigroup expects the company�s data-center business to show strength, along with �modest� growth in the core switching and routing businesses.

�We continue to argue for improvement in 2013 driven by positive trends in the U.S. labor market, which has traditionally been supportive of increasing enterprise investments,� he wrote on Monday, adding that he also believes there will be a �trough� in European markets and high spending by carriers.

He raised his price target on the stock to $24 from $21.