The Dow Jones Industrial Average experienced a slight decline in October, influenced by lackluster earnings from Microsoft and Meta Platforms, and an accounting scandal at AI server manufacturer Super Micro Computer, which negatively impacted AI stocks. The indices fell into the negative zone on the final day of the month, as shown in the corresponding chart.
Market downturns may present buying opportunities, prompting an examination of the three lowest-performing stocks in October to determine if these blue-chip stocks hold potential.
Nike experienced a 12.8% decline. The sportswear company’s struggles continued with another quarter of disappointing results, losing market share to emerging competitors and addressing errors made during the tenure of former CEO John Donahoe. In September, Nike replaced its CEO with Elliott Hill, a seasoned company veteran, to lead efforts in stabilizing the business and returning to growth. Hill’s expertise in managing Nike’s product and marketplace division could aid in rekindling the company’s strengths. Key areas of focus include revamping its wholesale operations, which were previously overlooked in favor of direct-to-consumer strategies, and refreshing the product lineup. Although there is potential for recovery, observable progress is needed before considering it a buy.
Merck saw a decline of 9.9%. The pharmaceutical company’s stock steadily fell in October, pressured by rising interest rates affecting dividend stocks, such as Merck, which offers a 2.9% yield. Despite a solid earnings report with a 4% revenue increase to $16.7 billion, exceeding expectations, the stock continued its downward trend. Keytruda, Merck’s cancer-fighting drug, continued to drive sales, increasing by 17% to $7.4 billion, accounting for nearly half of the company’s revenue. Adjusted earnings per share reached $1.57, higher than the anticipated $1.50. Although animal health sales rose by 6%, other drug franchises declined, elevating the concentration risk as Keytruda edges towards half of the company’s sales. Due to slow revenue growth, Merck’s stock may not be a compelling buy, even after its recent decline.
- Dow Inc. experienced a 9.6% loss. As one of the smaller entities on the Dow Jones Industrial Average, with a market cap of approximately $35 billion, Dow’s stock declined steadily in October. Although no single factor is attributed to this drop, rising interest rates influenced this cyclical stock sensitive to economic fluctuations. The company’s third-quarter report indicated a mere 1% growth in net sales, totaling $10.9 billion, with volume and pricing remaining flat. Adjusted earnings per share decreased slightly from $0.48 to $0.47. Dow has recently underperformed compared to the Dow Jones and the S&P 500, and the report offered little indication of reversing this trend. Nonetheless, dividend investors might consider the current 5.7% yield appealing. While specific guidance was not provided, the company mentioned an improving economic cycle and aims to exceed $3 billion in earnings by 2030.