A strong U.S. retail sales report during a week many retailers are announcing earnings helped stabilize the stock market Thursday after sharp losses the day before. The Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) seesawed between gains and losses but rallied toward the end of the session.
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A solid quarter but weak outlook from Cisco
Network equipment leader Cisco Systems reported fiscal fourth-quarter results in line with expectations, but flat orders and weak guidance raised investor concerns, sending shares down 8.6%. Revenue grew 4.6% to $13.4 billion and adjusted earnings per share rose 19% to $0.83. Analysts were expecting the company to earn $0.01 less per share on revenue of $13.4 billion.
Sales in the Americas, Cisco's most important region at 61% of revenue, grew 8.9% in Q4. But revenue from Asia-Pacific fell 3.8%, and CFO Kelly Kramer said in the conference call that the company's business in China plunged 25%. Overall, gross margin improved 90 basis points from last quarter and 230 basis points from the period a year ago. Orders were flat year over year, and Cisco guided to Q1 revenue growth of between 0% and 2%.
Cisco's challenges are centered on sales to service providers, especially Chinese telecoms, and orders would have been up mid-single digits if it weren't for a 21% drop in orders to that segment. Those struggles with service providers overshadowed the company's success in other areas today.
U.S. consumers boost Walmart's results
Walmart provided some welcome news on the retail front after it reported a sales gain and better-than-expected second-quarter results, propelling shares up 6.1%. Revenue rose 1.8% to $130.4 billion, exceeding the $130.1 billion analyst consensus. Adjusted earnings per share fell 1.6% to $1.27, but that was better than the 5.4% decline Wall Street was expecting.
Strength in U.S. sales boosted results for the giant retailer, with comparable sales excluding fuel increasing 2.8% year over year and 7.3% on a two-year stacked basis, the strongest growth in 10 years. Domestic traffic inched up 0.6%, the average ticket grew 2.2%, and U.S. e-commerce sales soared 37%. Net sales by Walmart International were up 3.3% in constant currency.
Looking forward, Walmart expects stronger domestic sales and raised its forecast for full-year earnings to a "slight decrease to slight increase," compared with the analyst consensus of a 1.6% decline.