3 Companies That Will Define the Week

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With 451 out of 500 companies in the S&P 500 (INDEX: ^GSPC) having reported, the earnings season is drawing to a close. However, three Dow Jones Industrial Average (INDEX: ^DJI) components report this week -- and they're doozies. On Tuesday, we'll hear from Cisco Systems (NAS: CSCO) and Home Depot (NYS: HD) ; on Thursday, it's retailing supersaurus Wal-Mart Stores' (NYS: WMT) turn. Each company indicates the strength of a different pillar of the economy, so they will be closely watched.

  • Wal-Mart and consumer spending: Wal-Mart's top line is an indicator of consumer sentiment and of shoppers' propensity to choose the low-cost option.
  • Home Depot and housing: The retailer's fortunes are tightly linked to the state of the housing market.
  • Cisco and corporate investment: The networking-equipment supplier's activity is highly dependent on businesses' willingness to spend on technology.

On the basis of estimated earnings over the next 12 months, Home Depot trades at a significant premium to the S&P 500, Wal-Mart is roughly in line with the index, and Cisco trades at a significant discount.

In his premium report on Cisco published in September, Fool technology analyst Tim Beyers wrote: "Shares of Cisco are priced for near-zero growth. Only the most apocalyptic of pessimists could take that sort of valuation seriously, especially when you factor in how fast Internet traffic is growing." Cisco's average price-to-earnings multiple (based on the next 12 months' earnings estimate) during September was 9.84. Since then, the shares have gotten roughly 10% cheaper: At Friday's closing price, the multiple stood at 8.85.


If you want to know the key areas to watch at Cisco, click here to request our premium report. You'll also receive a full year of updates -- including a full rundown of next week's earnings report.

The article 3 Companies That Will Define the Week originally appeared on Fool.com.

Alex Dumortier, CFA has no positions in the stocks mentioned above; you can follow him @longrunreturns. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend The Home Depot. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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