Cisco (CSCO-Q) Beats Expectations; Downward Guidance Good Opportunity for Longs

Cisco reported Q2 earnings last night and managed to beat lowered analyst expectations handily in terms of top-line and especially bottom line, reporting $0.38 EPS versus the consensus of $0.32 EPS. The Company generated $3.2 billion dollars in cashflow during the quarter on $9.1 billion in sales. The cashflow margin was 35% and the Company now has $29.5 billion dollars in cash on its balance sheet. Normally, this would be a very good spot to be...except for the 3rd quarter guidance offered by the Company.

Analysts had expected a flat Q3, but the Company has guided for a 15% to 20% decline in sales. As a technology company with one of the most international footprints around, Cisco has an unparalleled viewpoint on the strength of the world economy, and as expected, the first quarter of calendar 2009 looks really bad. The first half looks just plain bad.

The CEO continues to guide that it expected the Company to grow on an annualized basis between 12% and 17% for the long term. So there is longer-term optimism. With its huge balance sheet, cash generating capabilities, and its long-term growth prospects, it would be a great time to get into the stock after the traders are done pummelling it today.

I do not own Cisco stock...yet.

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