10:51 AM EDT, 08/09/2024 (MT Newswires) -- Cisco Systems ( CSCO ) fiscal Q4 earnings per share will slightly exceed consensus due to recent resets and Splunk synergies but significant stock movement will only result from "top line beats" in "greater size," likely in a couple of quarters, Morgan Stanley said in an earnings preview on Friday.

The networking environment remains muted, with ongoing inventory digestion among service providers, but a gradual recovery is expected, the firm said.

Cisco's ( CSCO ) performance is impacted by artificial intelligence-driven budget reallocations that is weakening networking and information technology spending and customers are delaying other refreshes, according to the firm.

Morgan Stanley said that "Splunk's stickiness makes it difficult for customers to move off" and Cisco ( CSCO ) has benefited from Splunk's strong deployment, which is expected to help in sustaining slight EPS beats in upcoming quarters.

The dislocation between Hewlett Packard Enterprise ( HPE ) and Juniper Networks ( JNPR ) has led to asset sweating and underperformance for Juniper but created opportunities for Cisco ( CSCO ), which will emerge as a likely beneficiary due to its existing vendor relationships and stability, the firm said.

Morgan Stanley reiterated its overweight rating on Cisco Systems ( CSCO ), with a $58 price target.

The company's fiscal Q4 earnings are scheduled on Aug. 14.

Price: 45.99, Change: +0.16, Percent Change: +0.34