Dow Movers: Cisco Energizes, Wal-Mart Is Downcast

The S&P 500 and the narrower Dow Jones Industrial Average (DJINDICES: ^DJI  )  were down 1.1% and 0.96%, respectively, at 10:15 a.m. EDT. Nevertheless, there is some positive news on the macro front: This morning's initial unemployment claims figure from the Labor Department for the week ended May 10 was the lowest in seven years, which suggests the job market continues to improve. Last month, the unemployment rate fell to 6.3%, the lowest level since the bankruptcy of Lehman Brothers in September 2008.

In company-specific news, Dow components and economic bellwethers Cisco Systems (NASDAQ: CSCO  ) and Wal-Mart  (NYSE: WMT  )  have reported quarterly results since yesterday's market close, but those results are not being received equally by investors.

Cisco Systems' previous two earnings reports provoked sell-offs in the networking specialist's stock. Yesterday afternoon's fiscal third quarter report is having the opposite effect, as the company's sanguine outlook is helping to reverse the negative sentiment that has weighed on shares. Cisco shares were up 7.1%. For my full take on the quarter, find out why I think Cisco remains a decent long-term bet (although it was a better bet at yesterday's prices than today's!).

Wal-Mart missed on both revenue and earnings per share for its fiscal first quarter ended April 30:


Actual/ Year-on-year growth (decline)

Consensus estimate


$114.2 billion


$116.3 billion





*Diluted EPS from continuing operations. Source: Wal-Mart Stores, Thomson FN

The company said severe weather was responsible for knocking $0.03 off its EPS, but, as the table shows, that isn't enough to explain the $0.05 miss with respect to analysts' consensus estimate. Net sales rose 0.8% year over year, or 2.1% if one excludes the impact of currency exchange rate fluctuations. There was no growth to be found in Wal-Mart's largest market: U.S. same-store sales fell 0.08% (up .12%, excluding the impact of weather).

These are disappointing numbers, particularly when one considers that Wal-Mart ought to have experienced a sales bump in the wake of the massive customer data breach at its largest U.S. competitor, Target (NYSE: TGT  ) . (Conversely, Wal-Mart's results do not bode well for Target when it reports its quarterly results next Wednesday.)

The last quarter was the first full quarter for Wal-Mart's new CEO, C. Douglas McMillon (incidentally, Target replaced its CEO 10 days ago). It's a challenging time to step into the top role at the sprawling retailer, but that's why he presumably gets paid the big bucks. Investors will be looking for McMillon to reenergize and refocus the company, particularly in its domestic market. At a forward price-to-earnings multiple of 13.3, according to Morningstar, the shares look like an adequate value, but no more than that.

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  • Report this Comment On May 15, 2014, at 10:33 AM, Chipperfool wrote:

    Wal-Mart should not be piddling with organics. It's not their shopper and they don't care.

    Target is a competitor, but Wal-Mart will not reap a windfall from the data breach. Most people shopping in Wal-Mart don't have data to breach.

    McMillan is an old fart--been around WMT a long time and will not bring any new ideas to the sprawling discounter.

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Alex Dumortier

Alex Dumortier covers daily market activity from a contrarian, value-oriented perspective. He has been writing for the Motley Fool since 2006.

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Related Tickers

8/27/2015 4:35 PM
^DJI $16654.77 Up +369.26 +2.27%
CSCO $26.17 Up +0.49 +1.91%
Cisco Systems CAPS Rating: ****
TGT $77.85 Up +1.01 +1.31%
Target CAPS Rating: ****
WMT $66.08 Up +1.25 +1.93%
Wal-Mart Stores CAPS Rating: ***