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Dow 30 Stock Roundup: Walmart, Cisco Earnings Impress

Swarup Gupta

The index enjoyed a strong week of gains after the after U.S.-China trade rhetoric cooled off to an extent. Trade-sensitive stocks moved higher as a result, boosting the blue-chip index. The reduction in trade tensions helped investors ignore dismal economic reports. Toward the end of the week, however, economic metrics came in above expectations even as key index members posted strong earnings.

Last Week’s Performance

The index gained 0.4% last Friday after Steven Mnuchin stated that trade talks between the United States and China were constructive. The Dow recovered from a 358-point slump suffered earlier in the session after the United States raised tariffs on Chinese products. Further, shares of The Boeing Company BA increased 0.2% and supported gains for the 30-stock index.

The index declined 2.1% over last week. This marked the Dow’s biggest weekly decline since March. Although trade negotiations continued between the United States and China, no sign of a breakthrough was visible.

Comments from top U.S. government officials raised concerns about a fresh tariff war which could dent investor confidence in risky assets like equities. Benchmarks remained in the negative territory for the most part of the week.

Dow This Week

The index slumped 2.4% on Monday, registering its second-worst daily decline for the year after China’s finance ministry announced retaliatory tariffs on U.S. products. An escalation in the trade conflict led to a broad-based decline in shares of trade-sensitive stocks. Shares of Caterpillar CAT, Apple AAPL and Boeing dropped 4.6%, 5.8% and 4.9%, respectively, and weighed on the 30-stock index.

The index increased 0.8% on Tuesday after the trade war rhetoric between the United States and China cooled slightly. Encouraging comments from Trump also supported gains for the broader markets. Gains for the 30-stock index were broad-based and supported by a rally in shares of Visa V and Boeing, which gained 1.8% and 1.7%, respectively.

The index increased 0.5% on Wednesday after the Trump administration was said to be considering a delay in the imposition of auto tariffs for the next six months. This development came a day after U.S.-China trade rhetoric cooled off to an extent.

Moreover, these reports more than offset weak economic data from both the United States and China. Gains for the 30-stock index were broad-based and supported by a rally in the shares of Verizon VZ and Boeing, which gained 0.5% and 0.8%, respectively.

The index increased 0.8% on Thursday, gaining more than 200 points. Strong earnings from Walmart Inc. WMT and Cisco Systems CSCO fueled gains for the Dow. Also, banks gained after the 10-year Treasury yield moved above 2.4% on stronger-than-expected economic data. Shares of Citigroup C, J.P. Morgan Chase JPM, Bank of America BAC and Goldman Sachs GS all gained more than 1%.

Components Moving the Index

Walmart's first-quarter adjusted earnings came in at $1.13 per share, way ahead of the Zacks Consensus Estimate of $1.02. However, earnings dropped about 0.9% year over year.

This could be accountable to lower operating income and increased net interest expenses related to the Flipkart deal. Including one-time items, Zacks Rank #3 (Hold) Walmart reported earnings of $1.33 per share, which surged from 72 cents reported in the year-ago quarter.

Total revenues advanced 1% to $123.9 billion that fell short of the Zacks Consensus Estimate of $125.2 billion. The year-over-year upside was largely driven by strength in the U.S. business. On a currency-neutral basis, total revenues grew 2.5% to $125.8 billion. (Read: Walmart's Q1 Earnings Top, Revenues Miss Estimates)

Cisco delivered third-quarter fiscal 2019 non-GAAP earnings of 78 cents per share, which beat the Zacks Consensus Estimate by a penny. Further, the figure rose 18.2% from the year-ago quarter. Cisco has a Zacks Rank #3.

Revenues increased 6% year over year, excluding Service Provider Video Software Solutions (“SPVSS”), to $12.958 billion and surpassed the Zacks Consensus Estimate of $12.875 billion. Acquisitions contributed 40 bps to the top line in the reported quarter.

For fourth-quarter fiscal 2019, revenues are expected to grow 4.5-6.5% on a year-over-year basis. Non-GAAP earnings are anticipated between 80 cents and 82 cents per share. The Zacks Consensus Estimate for earnings is pegged at 80 cents. (Read: Cisco Systems Q3 Earnings & Revenues Beat Estimates)

American Express Co. AXP has agreed to buy Resy, a digital restaurant reservation booking and management platform. With this deal, the company aims to provide its customers with a growing suite of digital-first benefits and services. This includes providing card members with access and experience across travel and lodging, airport lounges, exclusive events and dining. American Express has a Zacks Rank #3.

With Resy’s presence across the U.K., Europe, Canada and Australia, the deal will give American Express a presence in the region’s growing hospitality industry. Resy has under its roll approximately 4,000 restaurants in 154 U.S. cities and 10 countries, which serve more than 2.6 million diners a week. (Read: American Express to Buy Resy & Expand in Hospitality Space)

Goldman Sachs Group is likely to strike a deal soon with United Capital Financial Partners, per The Wall Street Journal. Goldman Sachs has a Zacks Rank #3.

The addition of United Capital, a California-based investment advisory firm, would be Goldman’s biggest deal post 2008 financial crisis. Notably, the deal value is anticipated to be between $700 million and $750 million, as reported by CNBC.

With about $24 billion in assets under management, United Capital offers financial life and investment management services through its subsidiary, United Capital Financial Advisers.

It also offers wealth management services through FinLife Partners, which is currently used by 46 registered investment advisers with $25 billion in assets. The stock has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

International Business Machines Corporation IBM recently announced that it is on track with the previously announced investments in France, aimed at creating around 1,800 “new collar” jobs.

New graduates and experienced technical professionals are being hired for emerging technology roles pertaining to data science, cloud computing, IoT, AI, cognitive business, cybersecurity and blockchain. These skills have been termed “new collar” by Zacks Rank #3 IBM's chairman, president and CEO Ginni Rometty.

The company recently noted that more than 1,000 vacancies have been occupied. On the back of ongoing initiatives and expansion of “new collar” programs, IBM aims to fill the remaining vacant positions in the days ahead. (Read: IBM to Strengthen Foothold in France With New Collar Program)

Pfizer, Inc. PFE and its German partner Merck KGaA announced that the FDA has approved their supplemental Biologics License Application (sBLA) for PD-L1 inhibitor, Bavencio (avelumab).

The sBLA was looking to get the label for Bavencio expanded for the first-line treatment for advanced renal cell carcinoma (“RCC”), the most common form of kidney cancer, in combination with Pfizer’s another cancer drug, Inlyta (axitinib). (Read: Pfizer's Bavencio+Inlyta Combo Gets FDA Nod for Kidney Cancer)

Additionally, Zacks Rank #3 Pfizer announced that a pivotal late-stage study evaluating its investigational JAK1 inhibitor abrocitinib for the treatment of moderate-to-severe atopic dermatitis (AD), also called eczema, met all co-primary and secondary endpoints.

The phase III study (B7451012) evaluated two doses (100mg and 200mg once daily) of abrocitinib (PF-04965842) monotherapy in patients aged 12 and above for over 12 weeks. (Read: Pfizer's Eczema Candidate Meets All Goals in Phase III Study)

Performance of the Top 10 Dow Companies

The table given below shows the price movement of the 10 largest components of the Dow, which is a price-weighted index, over the past five days and during the last six months. Over the past five trading days, the Dow has gained 1.7%.

Next Week’s Outlook

Stocks have gained significantly from the reduction in trade tensions. While the Trump administration is likely to hold back higher auto tariffs, the U.S. President has considerably toned down his protectionist rhetoric.

Meanwhile, earnings from major blue-chip stocks have been more than encouraging. If economic data continues to come in above expectations, stocks could notch up strong gains in the week ahead.

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Cisco Systems, Inc. (CSCO) : Free Stock Analysis Report
 
International Business Machines Corporation (IBM) : Free Stock Analysis Report
 
JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
 
Bank of America Corporation (BAC) : Free Stock Analysis Report
 
Citigroup Inc. (C) : Free Stock Analysis Report
 
Pfizer Inc. (PFE) : Free Stock Analysis Report
 
Verizon Communications Inc. (VZ) : Free Stock Analysis Report
 
The Boeing Company (BA) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
The Goldman Sachs Group, Inc. (GS) : Free Stock Analysis Report
 
American Express Company (AXP) : Free Stock Analysis Report
 
Caterpillar Inc. (CAT) : Free Stock Analysis Report
 
Walmart Inc. (WMT) : Free Stock Analysis Report
 
Visa Inc. (V) : Free Stock Analysis Report
 
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