Cisco Systems (CSCO) is set to report second-quarter fiscal 2015 results on Feb 11. Last quarter, the company posted in-line results. Let’s see how things are shaping up for this announcement.

Factors to Consider

Cisco’s first-quarter earnings of 48 cents were in line with the Zacks Consensus Estimate. Revenues decreased 0.9% sequentially but increased 1.3% year over year to $12.23 billion and surpassed the Zacks Consensus Estimate of $12.13 billion.

However, the first quarter was weak for Cisco in terms of margin growth especially due to unfavorable product mix.

Despite growing competition from several smaller players, Cisco appears to be strong in its domain. Improving markets for the company’s products in the United States and Europe, strong renewals, large multi-year service wins and solid growth prospects in areas like cloud computing, consulting, managed services and security could boost earnings in the to-be-reported quarter.

For the second quarter, Cisco expects revenues to increase in the range of 4% to 7% on a year-over-year basis. The company expects non-GAAP gross margin within 61–62% and non-GAAP tax rate of 22% yielding non-GAAP earnings per share of 50 to 52 cents.

Earnings Whispers

Our proven model does not conclusively show that Cisco Systems will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 45 cents. Hence, the difference is 0.00%.

Zacks Rank: Cisco has a Zacks Rank #3 (Hold) which, when combined with a 0.00% ESP, makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

You could consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:

Impax Laboratories Inc. (IPXL), with an Earnings ESP of +72.73% and a Zacks Rank #1 (Strong Buy).

CYS Investments, Inc. (CYS), with an Earnings ESP of +3.13% and a Zacks Rank #1.

Arch Capital Group Ltd. (ACGL), with an Earnings ESP of +0.95% and a Zacks Rank #1.

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