Stocks ended mostly higher Monday as investors piled back into equities after a tumultuous two-week period that has seen markets pull back steeply from recent highs. Fading fears about the Ebola virus, which reportedly is now absent from Nigeria, could be helping equities recover as Wall Street’s fears about the virus ebb.
Despite the mostly bullish outlook, shares of International Business Machines (IBM), Cisco Systems (CSCO) and CSX Corp. (CSX) each took a tumble on Monday, ending as three of the most notable decliners.
International Business Machines (IBM)
IBM stock was one of the most horrific blue-chip decliners of the day, plunging 7.5% after third-quarter results failed to meet expectations. Its software, hardware, and service segments each underperformed in the period, and IBM doesn’t expect its business to turn around anytime soon. CEO Ginni Rometty said that IBM’s projected earnings per share in 2015 weren’t going to crack $20 — the first time IBM has formally acknowledged 2015 EPS wouldn’t exceed that level in five years.
IBM stock almost single-handedly drove down the Dow today as a result of its weak results and forecasts.
Cisco Systems (CSCO)
CSCO stock didn’t get hit nearly as hard as IBM stock today, but then, Cisco didn’t report earnings. However, the increasing focus on cloud technology and IBM profit miss is worrying CSCO shareholders today.
Although CSCO stock is up marginally (about 2%) year-to-date, Cisco isn’t the exciting, high-growth tech company of tomorrow that it used to be in the ’90s. Today, Cisco is a low-growth tech company trying to adapt to the rapidly changing ecosystem of 21st-century Silicon Valley.
Still, while shares fell 1.5% Monday as big tech names suffered, CSCO is an attractive play for income-oriented value investors. Backing out cash and short-term investments, Cisco shares trade at just 5.5 times forward earnings when you back out cash. Add in a 3.3% dividend yield, and you’d be hard-pressed to argue CSCO stock is overvalued at current levels.
CSX Corp. (CSX)
The last of today’s big-name decliners didn’t hail from the tech sector, but Wall Street sold off its stock anyways. $33 billion Jacksonville, Florida-based railroad operator CSX Corp. shed 1.2% on Monday after talks broke down with Canadian Pacific Railway (CP). CSX had been considering a merger with CP, in what InvestorPlace’s Dan Burrows termed a potential “win-win-win” situation for CSX, CP, and the railroad system in general:
“Historically, regulators have been reluctant to let the railroad industry to consolidate on this scale, but in this case it makes tremendous sense.
After all, CP and CSX’s route systems have very little overlap. That not only helps quash antitrust concerns, but could actually be hugely beneficial to anyone who operates on U.S. rails.”
Unfortunately for CSX stock, antitrust concerns played a big role in dooming the merger today.
As of this writing, John Divine did not hold a position in any of the aforementioned securities.
