These 2 Dow Companies Are Delivering

Stocks lost ground today, as the Dow (INDEX: ^DJI  ) and the broader S&P 500 (INDEX: ^GSPC  ) declined 0.5% and 0.4%, respectively. Nevertheless, two Dow components reported solid results; both are bellwethers for the economy and, because one of them – Cisco Systems – reported after the close, it should help lift shares tomorrow.

The micro view: Home improvement retailer Home Depot (NYSE: HD  ) reported this morning, beating its earnings and revenue estimates. For its trouble, investors bid the shares up 3.6% -- the best performance within the Dow today -- to $63.38, their highest close price in more than twelve years! Year to date, Home Depot is the second-best performing stock in the Dow, up 51%.

Cisco Systems (Nasdaq: CSCO  ) reported results for its fiscal first quarter after the market's close. The networking infrastructure leader announced earnings per share of $0.48 (ex-items), compared with a consensus estimate of $0.46. Revenues also came in ahead of estimates, at $11.9 billion, versus $11.77 billion. Shares were up 7%, at $18.04, in after-hours trading; but, even at that level, they're roughly flat on the year. Contrary to Home Depot, that puts Cisco in the bottom third of Dow stocks.

Is this tech stalwart broken, or do the shares represent an opportunity for patient investors? My inclination is to think the latter: Stock valuations and returns are mean-reverting and, in Cisco's case, both are depressed. (Cisco trades on a price-to-forward earnings multiple of less than nine.) If you want a comprehensive answer to that question, click here to request technology analyst Tim Beyers' premium report on Cisco, which includes twelve months of updates.


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