Update on Cisco and Taylor Wimpey

<p>Expectations do indeed trend lower in the face of elusive growth and that applies to Cisco, which reported another decline, yet, can be categorised among […]</p>

Expectations do indeed trend lower in the face of elusive growth and that applies to Cisco, which reported another decline, yet, can be categorised among companies who beat market expectations this earnings’ season.

Yesterday (14th May), Cisco reported third-quarter revenue of around $11.5bn, marking a 5.5% drop from the same period last year, and, beating expectations of a 6% to 8% decline.

Net income for the period came in at some $2.2bn, a decline from the $2.5bn made in the third quarter last year.

By business, strong performance mainly in its Data Center (up 29%) and Security (up 10%) segments helped offset declines in other businesses; including Service Provider Video (down 26%) and Collaboration (down 12%).

By the way, the businesses for which the network equipment maker is known – switching and routing products – also saw declines.

Meanwhile, by region, the company highlighted emerging markets as posing something of a challenge in the quarter (orders down 7% year-on-year).

Looking ahead, the company expects its fourth-quarter revenue to decline between 1% and 3% compared to the same period the year before.

Nonetheless, the market cheers – its shares are up 7% (at time of writing), bringing an ascent since lows in March to around 14%.

To be sure, Cisco does have its fingers in – and intentions of pushing ahead with – technology areas that are seen as growing and it certainly has the wherewithal to follow through.  But, its near-term challenges are apparent.

Earlier this week, on this side of the Atlantic…

Housebuilder, Taylor Wimpey, updated the market on Tuesday (13th May) and saw its shares rise on the back of that update.

Strong performance in the UK housing market, which drove sales rates and pricing up to the upper end of expectations, gave Taylor Wimpey’s management the confidence to raise the company’s financial targets.

For 2014, Taylor Wimpey now expects to deliver an operating profit margin increase of at least 3% over last year’s operating margin of around 13%. 

For the period 2015 to 2017, the company forecasts an average operating profit margin of 20% over the period and a return on net operating assets of at least 20% a year.

Additionally, it pledged to return strong additional cash to investors over the medium term, as well as stating that future payments could exceed £200m per annum in cash returns.

Of course, the company’s optimistic update was met with market optimism, albeit short-lived: its shares closed up around 7% on the day but have since erased most of those gains.

It’s no secret that housebuilders are currently enjoying favourable trading conditions but, weighing on the sector of late have been concerns over possible near to mid-term risks, as highlighted here previously, to the strong housing market.

Certainly, Taylor Wimpey’s update was positive, but some of those concerns still remain.

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