Cisco (NYSE: CSCO) stock price bounced after beating second-quarter revenue and earnings estimates. Although the company generated negative revenue growth, its earnings increased from the past year period. The company anticipates further stabilization in financial numbers in the following quarters of fiscal 2020. The stocks dividend increase of almost 3 per cent also helped it in reversing the bearish sentiments.
Cisco stock is currently trading around $48, down from the highest level of $58 a share. CSCO share price underperformed compared to the industry peers over the past couple of months; the share price lost more than 7 per cent of value in the past six months.
Second Quarter Beat Added to Cisco Stock Upside Potential
The communication equipment provider generated stronger than expected performance in the second quarter. Its second-quarter revenue of $12bn declined 4 per cent from the past year period. The revenue decline was almost 2 per cent lower than analysts’ expectations. Its earnings, however, enlarged sharply compared to the past year period. The company reported second-quarter earnings per share of $0.68, up 8 per cent from the same period last year.
“We executed well this quarter by delivering strong margins and EPS growth while driving more software and subscriptions,” said Kelly Kramer, Chief Financial Officer of Cisco. “Our increased dividend shows confidence in the strength of our ongoing cash flows and demonstrates our commitment to shareholder return.”
Dividend Growth Indicates Confidence in Future Fundamentals
The company raised its quarterly dividend by 2.9 per cent to $0.36 per share. This represents the ninth consecutive year of a dividend increase. The dividend increase indicates that Cisco is forecasting steady growth in financial numbers in the coming quarters. It anticipates third-quarter revenue to decline 3 per cent year over year while earnings are likely to increase at a high mid-single-digit rate. CSCO had generated $3.8bn in operating cash flows in the second quarter, which offers a complete cover to dividend payments of $1.5bn.