Booming Walmart, Cisco results show US economy’s strength is real and broad-based
- August 18, 2018
- Posted by: consortiumconsultancy
- Category: Uncategorized
- Major U.S. companies including Walmart and Cisco are confirming positive GDP macro data by posting their strongest financial results in many years. The reports indicate broad-based strength in the domestic economy.
- Walmart said Thursday that it had generated its highest domestic same-store sales growth in more than 10 years for its second quarter, with an increase of 4.5 percent versus the Thomson Reuters 2.4 percent estimate.
The strong GDP economic data for the June quarter is showing up in the real economy.
Major U.S. companies including Walmart and Cisco are confirming the positive macro data by posting their best financial results in many years. The reports indicate broad-based strength in the domestic economy.
Last month the government said second-quarter GDP grew at 4.1 percent, the fastest pace in nearly four years.
Perhaps no single company is a better barometer of economic health than Walmart, the country’s largest retailer. In 2016, the company said more than 40 percent of the U.S. population, or 140 million people, shopped at Walmart on a weekly basis.
And now Walmart’s sales growth is better than at any time in the past decade.
The retailer’s shares closed up 9.3 percent Thursday after it posted its highest domestic same-store sales growth in more than 10 years for its second quarter. Walmart reported an increase of 4.5 percent versus the Thomson Reuters estimate of 2.4 percent.
It is not just retail, big tech bellwethers for the economy are doing great too.
Cisco is regarded as a good barometer of enterprise spending due to its market leadership in key technology products. It sells networking switches and routers, which companies use to add capacity to serve their customers.
The company’s shares rose 3 percent Thursday, a day after the largest networking switch and router maker reported better-than-expected fiscal fourth-quarter earnings and gave guidance above consensus for its next quarter.
One Wall Street analyst cited the economy’s strength as a driver for Cisco’s solid numbers.
“We see [Cisco’s] performance as reflective of good execution, including the evolution to a more software centric business and new product cycles, and a healthy macro,” Raymond James analyst Simon Leopold said in a note to clients. “We see enterprise demand as healthy.”
Cisco CEO Chuck Robbins confirmed that the U.S. and global economic expansion helped the company’s strong results.
“This quarter … it was broad-based for us,” Robbins said on CNBC’s “Squawk on the Street” Thursday. “Across all our customer segments, our enterprise business grew 11 percent this quarter in orders, commercial was up 9.”
In similar fashion, AMD’s optimism over its server chip business last month shows the general economy is humming and consumer demand is healthy. The chipmaker sells high-profit-margin server chips to data centers and cloud computing providers, which companies also use to add capacity for their products and services.
AMD reported better-than-expected second-quarter sales and earnings results in late July. The company’s revenue soared 53 percent year over year in that quarter.
The chipmaker’s CEO, Lisa Su, said on the earnings call that the company’s chip sales to data centers “increased significantly” and “saw some nice acceleration.” She also added that the personal computer market is “doing a little bit better than most people expected.”
“We had an outstanding second quarter with strong revenue growth, margin expansion and our highest quarterly net income in seven years,” Su said in the earnings release.
In recent weeks worries over trade wars, tariffs, geopolitical turmoil and emerging market financial crises have dominated the discussion.
But investors should take solace in the mounting evidence from major corporate bellwethers that the state of the U.S. economy is strong and getting better.