5 big earnings hits: Analysts wary after Cisco's beat; Walmart sales hold firm

Here is your Pro Recap of the biggest earnings reports you may have missed this week and how analysts responded: numbers out of Cisco, Walmart, Home Depot, and Applied Materials.

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Cisco tops expectations; analysts mixed

Cisco (NASDAQ:CSCO) shares climbed 3.3% Thursday after the tech behemoth sailed past Wall Street expectations for the fiscal fourth quarter thanks to a growing enterprise appetite for AI, security, and cloud.

The company said adjusted earnings per share came to $1.14 - $0.08 better than consensus - on revenue of $15.2 billion which edged past the $15.05B average target.

Earnings guidance for Q1 topped expectations at $1.02 to $1.04 per share - the Street was looking for $0.99 - and revenue of $14.5B to $14.7B was in line with targets. Full-year expectations were for earnings of $4.01 to $4.08 per share on sales of $57B to $58.2B; analysts were seeking $4.04 per share on $58.4B in revenue.

CEO Chuck Robbins said on the earnings call that Cisco is poised for "further share gains" in campus switching, wireless LAN, and SP routing, having gained "over 3 percentage points of market share" vs. the prior year in those key areas, and believes the company is "super well positioned" on AI.

Following these results, analysts at BofA, Citi, and KeyBanc all kept their neutral ratings on the stock.

BofA and KeyBanc highlighted the company's solid execution and innovation, but BofA sees "additional risk to estimates" given a "diminishing backlog contribution" that would necessitate a "significant order recovery throughout F24, which might not materialize." And KeyBanc is staying neutral until it sees "move consistent consistent signs of share gains and improved visibility into F2H24 order growth ramp."

Citi similarly said it is staying on the sidelines until it sees further market share gains in "switch and security," adding that Cisco's talk of AI share gains was "encouraging," but "we await third party data verification to get more excited about share gains."

Evercore, however, maintained its Outperform rating on Cisco and raised the target price by $3 to $63, arguing that the fiscal 2024 guidance is "fairly conservative with room for upside" across multiple segments. It also believes the company's commitment to "showing operating leverage," and more consistent share buyback of some $1.5B quarterly, "will resonate with investors and provide higher predictability for CSCO shareholders going forward."

Cisco shares closed Thursday at $54.73.

Walmart beats, shares still slip

Thanks to a surfeit of budget-conscious shoppers, Walmart (NYSE:WMT) said Q2 same-store sales (excluding gas) rose 6.3% from the prior year, better than the 4% estimates, and the world's largest retailer also boosted its full-year guidance.

The company now sees full-year adjusted EPS at $6.36 to $6.46, well ahead of its prior range of $6.10 to $6.20. Analysts polled by InvestingPro were looking for an average of $6.28. And its top line is projected to grow by about 4% to 4.5% in all of fiscal 2024, up from the prior estimate of some 3.5%.

Walmart also said Q2 earnings totaled $1.84 per share, beating the $1.69 Street expectation.

Still, shares slipped 2.2% Thursday after a jump in premarket trading.

CEO Doug McMillon said in a statement that Walmart's food segment had been a source of "strength" for the group in the 13 weeks ended on July 29. Groceries have been a key performance driver for Walmart during a recent bout of elevated inflation in the U.S., helping the business overcome a broader pullback in spending on nonessential items that has hit peers like DIY chain Home Depot and big-box firm Target.

Shares ended Thursday at $155.69.

Target results better than feared

Meanwhile, a day earlier, Walmart-rival Target (NYSE:TGT) saw shares rise 3% on a guidance revision that was less egregious than feared.

Target's Q2 comps slid 5.4%, worse than the expected 3.8% decline. Revenue reached $24.8B, a decrease of 4.9% compared with $25.33B in the prior year.

Gross margin improved to 27%, surpassing last year's 21.5% and exceeding the estimated 25.6%.

Adjusted earnings per share came in at $1.80, easily ahead of the expected $1.47.

For Q3, the company expects adjusted EPS of $1.20 to $1.60, well under the $1.84 consensus, while also lowering EPS estimates by $0.75 to a range of $7 to $8. Analysts were widely expecting Target to lower its guidance, and the delivered cut was seen by the market as better than feared.

RBC also said the guidance "could be conservative as mgmt looks to set a floor. All in all, barring any negative surprises on current comp trends, we think there's enough here to get shares moving in the right direction."

Citi also noted the recent negative sentiment around the stock, which explained the sigh of relief from the market regarding its guidance revision.

Target shares closed Wednesday at $128.75.

Home Depot tops consensus

Home Depot Inc (NYSE:HD) posted Q2 comps, net sales, and EPS declines that were less steep than anticipated on Tuesday.

Comparable-store sales were down 2% vs. Wall Street expectations for a 4.1% decline, and its top line was down 2% from the prior year to $42.9B, but analysts were looking for $42.1B. EPS came to $4.65, a slide from last year's $5.05 but better than the $4.46 consensus.

Home Depot maintained its outlook for the fiscal year 2024, expecting comps to fall in a range of 2% to 5% and an EPS decline of 7% to 13%.

CEO Ted Decker acknowledged "continued pressure in certain big-ticket, discretionary categories" even amid strength in categories associated with smaller home-improvement projects, adding, "We remain very positive on the medium-to-long term outlook for home improvement and our ability to grow share in a large and fragmented market.”

Shares traded up fractionally to $332.14 on Tuesday.

Applied Materials trounces guidance expectations

Finally, Applied Materials (NASDAQ:AMAT) delivered blowout earnings guidance after the bell Thursday after fiscal third-quarter results beat analyst estimates as the ongoing enterprise race to join the digital and AI era supported chip demand and bolstered growth.

Fiscal Q4 adjusted EPS is expected at $1.82 to $2.18, smashing the consensus for $1.59, and sales of approximately $6.51B trounced the 5.87B average target.

For Q3, adjusted EPS totaled $1.90, comfortably topping estimates for $1.74, and revenue of $6.43B surpassed the $6.15B average estimate.

Sales in semiconductor systems, the company's largest business, fell 1.2% to $4.68B.

Bernstein raised Applied Materials' price target to $175 from $150 after these results.

Shares were rising 3% to $141.76 in premarket trading Friday.

Yasin Ebrahim, Scott Kanowsky, and Senad Karaahmetovic contributed to this report.