The Dow Jones Industrial Average (^DJI -0.13%) has been lagging the broader market in 2023, having fallen to a loss for the year in late October before a big bounce carried it back into positive territory. Nevertheless, with just a 3% rise year to date, the Dow has some investors thinking that it’s missing out on key growth trends that have carried other indexes much more sharply upward.
With the key holiday shopping season upon us, retail stocks in the Dow will play a key role in determining the fate of the popular stock benchmark for the remainder of the year. Retailers Home Depot (HD -0.57%) and Walmart (WMT -8.09%) will release their latest financial reports this week, and both Dow components could move markets. Also making a report will be networking giant Cisco Systems (CSCO -9.84%). Here’s what to look out for from these three companies.
Can Home Depot keep climbing?
Shareholders in Home Depot will get the latest results from the home improvement retailer early Tuesday, and they’ll be hoping for some good news. The stock is down so far in 2023, and many expect Home Depot to remain under pressure.
It’s likely that Home Depot will keep seeing its key financials deteriorate. Most of those following the stock see the company posting a decline of more than 8% in revenue, and earnings of $3.58 per share would be down roughly 16% from the same quarter last year.
Shareholders have had to endure an extended period of cyclical weakness from Home Depot. Second-quarter results included a 2% drop in sales that led to an 8% decline in earnings per share. Yet from a broader perspective, a pullback after such strong performance in past years was likely inevitable, given the cyclical nature of demand for home improvement retail goods.
With high interest rates pinning down the housing market, it’s too early to expect a definitive timeline for when Home Depot could recover. Nevertheless, investors will watch Home Depot’s report closely for signs that the economy might be ready to turn.
Cisco looks to build upward momentum
Investors generally have higher hopes for Cisco when the networking company reports fiscal first-quarter financial results for the period ended Sept. 30 after the closing bell on Wednesday. Current calls are for the company to post a modest 4% rise in sales, with the potential for double-digit percentage increases in earnings per share as a consequence.
After jumping sharply during the spring and summer months, Cisco’s stock has fallen back somewhat since August. As some had predicted, Cisco’s hefty reliance on networking hardware has left it somewhat more exposed to signs of slowing IT spending. With news of some giant customers cutting back on capital expenditures, investors have prepared for what could be a slower period for Cisco’s growth.
Yet Cisco has also ramped up its software business, and that segment tends to be somewhat less prone to cyclical swings. If its results prove to be steadier than expected, then it could mean that Cisco has overcome a challenge that has historically held the stock back.
Walmart preps for a slowdown
Thursday should bring Walmart’s latest report, and investors generally expect weaker performance for the fiscal third quarter that ended Oct. 31. Most of those following the stock see sales falling about 2% from year-ago levels, with a 6% drop in earnings to $1.41 per share.
Yet Walmart’s stock remains at all-time highs. After some initial skepticism, Walmart’s efforts to become a leader in online retail have played a key role in the retail giant’s ongoing dominance. Still, even Walmart is feeling the pinch of consumer weakness, particularly as struggling shoppers rein in their spending on higher-ticket, higher-margin items in favor of necessities.
What Walmart says about how it performed will be important, but its predictions about the holiday quarter could be even more crucial. If the shopping season proves to be a bust, it could hurt not only Walmart, but the entire consumer economy.
Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cisco Systems, Home Depot, and Walmart. The Motley Fool has a disclosure policy.