5 Things to Watch This Week: Drugstores, E-tailers, Cisco, Cintas, and Breadsticks
Let's go over some of the items that will help shape the week that lies ahead on Wall Street.
1. Drugstores on Parade: Walgreen (WAG) and Rite Aid (RAD) report later this week.
Investors should get a good snapshot of the pharmacy industry after taking in the two reports, but it's easy to be encouraged. CVS Caremark (CVS) had some healthy news last week, providing a healthy growth outlook in the teens for the year ahead and boosting its dividend by a hearty 38 percent.
All drugstore chain operators aren't alike. Rite Aid has been a mess. You have to go back to 2007 the find the last time it posted a quarterly profit, and it hasn't shelled out a dividend since 2008. Analysts see another quarterly loss when it reports on Thursday, but at least it's likely to be a narrowing deficit.
Walgreen reports on Friday morning, and Wall Street's forecasting reasonable bottom-line growth there.
2. A Serious Week for Cyber Shopping: Christmas falls on a Tuesday this year -- a week from this Tuesday, in fact -- and that means that even the most stubborn of procrastinators who want to get gifts under their trees need to finish up their shopping by next Monday.
Malls will naturally be crowded next weekend, but this period is when the urgency peaks for online retailers. Outside of gift certificate sales, Web-based retailers know that the holiday shopping window is closing. No one is going to place an order over the weekend without paying a bundle for overnight delivery, and many shoppers will avoid placing orders during the final days of this week if they hope to avoid shipping delays.
In other words, expect online retailers -- and even bricks-and-mortar chains that have healthy Internet operations -- to market sales aggressively early in the week.
3. Cisco Takes Another Step Away From Consumers: Cisco Systems (CSCO) big niche is manufacturing networking equipment. We're talking about routers, switches, and all of the high-end gear that makes communication possible.
Cisco has always had a strong presence in the enterprise market. Companies come running to Cisco when they need to upgrade their networks. However, the same thing can't be said for consumers. Cisco has been a surprising laggard outside of the corporate IT departments.
A few years ago, it shuttered its once-popular Flip camera business. A year ago, it killed its Umi line of home videoconferencing gear. Now it's apparently looking to take another step back in the consumer market by unloading its Linksys family of retail routers.
Bloomberg reported over the weekend that Cisco is trying to smoke out a buyer, and that the final price will likely be less than the $500 million it paid to acquire Linksys. The details will likely come quickly if this is true. When it comes time to remove the proverbial bandage, Cisco has a history of tearing it off quickly.
4. Unlimited Bread Sticks: Darden Restaurants (DRI) is one of the companies reporting this week. And if the company's name doesn't ring a bell, you certainly know some of its chains: Olive Garden, Red Lobster, Bahama Breeze, LongHorn Steakhouse, and a few smaller concepts. Its two largest operations -- by far -- are the seafood-centric Red Lobster and that cornucopia of unlimited salad and bread sticks, Olive Garden.
Analysts foresee a modest 6 percent uptick in sales, but profit margins are getting crushed. Wall Street's eyeing a profit of just $0.26 a share out of Darden, well below the $0.41 a share it served up a year earlier during the same quarter.
Shareholders may want to keep the antacids close in case the report causes indigestion.
5. Just Follow the Uniforms: An earnings report that bears watching will be fresh financials out of Cintas (CTAS).
Cintas is the leading provider of workplace uniforms. The company provides freshly washed uniforms and other workplace essentials that require repeated replenishing.
Even if you don't own a piece of Cintas -- and most investors don't -- the report matters, because its a great way to take the pulse of corporate America. If companies are hiring, it naturally results in more business for Cintas. If not, it won't just be the Cintas uniforms that are getting pressed.
Motley Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool owns shares of Darden Restaurants. Motley Fool newsletter services recommend Cisco Systems and Cintas.
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