'Until Investors Gain Confidence', Citi Lowers Earnings Expectations on Cisco Systems (CSCO)

Citi reiterated its Hold rating on shares of Cisco Systems, Inc. CSCO Thursday, noting that "While valuation near historic lows (11.1x our F12M EPS ests) likely limits downside, we believe the shares will remain range-bound until investors gain confidence in Cisco's ability to execute its turn-around plan and are comfortable with a reset growth and margin trajectory." Cisco Systems designs, manufactures, and sells Internet protocol (IP)-based networking and other products related to the communications and information technology industry and provide services associated with these products and their use. Cisco reports quarterly earnings after the bell on Wednesday, May 11 after the bell. Citi expects CSCO to beat on revenues, but "continued margin pressures likely limit topline upside translating into EPS upside." Citi holds a $20 Target Price on the stock. Citi lowered its 4Q, FY12, and FY13 earnings estimates for Cisco. Citi notes that "While CSCO is taking the necessary steps to refocus, working through the competitive and margin pressure in its core routing and switching business it will likely be a multi-quarter or multi-year process. Our view remains that Cisco needs to choose between protecting share or preserving margins, it simply can't do both and that management needs to be frank with the investing comm unity and reset its operating model to the “new normal.” Shares of Cisco are higher by $0.03 in pre-market trade this morning, to $17.50.