Cisco Stock Leaps As Easing Supply Chains Power Q1 Earnings Beat, Profit Forecast Boost

CEO Chuck Robbins said easing supply chains allowed for a reduction product backlogs and improved component availability and helped produce a solid first quarter earnings beat.

Cisco Systems  (CSCO) - Get Free Report shares powered higher Thursday following a stronger-than-expected first quarter earnings report and a robust near-term outlook amid easing supply chain disruptions for the network equipment chipmaker.

Cisco said adjusted non-GAAP earnings for the three months ending in October, the group's fiscal first quarter, came in at 86 cents per share, topping Street forecasts by 2 cents. Group revenues, Cisco said, rose 6% from last year at $13.6 billion, topping analysts' estimates of a $13.3 billion tally.

Cisco said it sees revenues rising between 4.5 and 6.5% from last year over the current quarter, with adjusted earnings in the range of 84 to 86 cents per share. The group also unveiled plans for a $600 million restructuring plan that could see a headcount reduction of as much as 5%.

Gross margins are expected in the 63% to 64% range, a level Cisco didn't expect to see until the second half of this fiscal year, with full-year revenues guided to between $54 billion and $55 billion.

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"Like you've heard from others in the industry, we are encouraged by what we are seeing with modest improvement in certain component availability as shortages continue to ease from last quarter," CEO Chuck Robbins told investors on a conference call late Wednesday. "The redesign of many of our products has also helped bring supply stability and more resiliency."

Cisco shares were marked 43.4% higher in pre-market trading to indicate an opening bell price of $45.90 each.

The group's order backlog, which had reached record levels last quarter amid the supply chain snarls, was reduced by around 10% from the previous quarter as shipping channels eased. However, increased macro uncertainty has blunted near-term demand, with product orders falling 14% from last year.

"While Cisco beat the consensus estimates and guided slightly above the consensus estimates, the performance in the quarter materially benefited from an improved supply chain that enabled Cisco to ship orders that had been held in backlog," said JMP Securities analyst Erik Suppiger, who carries a 'market perform' rating on the stock.

"The reduction in backlog reduces investor visibility into underlying demand trends, but we believe demand is mixed as management noted economic weakness impacting business in Europe," he added.