April's Worst Dow Stocks
May 1st 2013 4:33PM
Updated May 1st 2013 4:50PM
The Dow Jones Industrial Average has been on a tear in its recent run-up to record highs, but in April the index couldn't keep up the torrid pace of early 2013. The Dow only picked up 1.8% in the fourth month of the year -- a far cry from the 13%-plus it has gained since the start of January.
A few plunging stocks didn't help the index's fortunes last month. From one company mired in the downfall of the PC market to another crushed by disappointing earnings, here are the Dow's three biggest losers in April.
Earnings hit hard
The Dow plowed through the thick of earnings season in April, and IBM's disappointing quarterly results sent investors scurrying. Shares of Big Blue fell 4.6% for the month, and as the most expensive stock on the price-weighted Dow, IBM played a big role in limiting the Dow's April gains.
Why did IBM do so badly? The company's revenue sank 5% for the quarter, and while earnings managed to climb slightly, the whiff was IBM's first miss in years. The company reacted quickly by expressing interest in selling some of its businesses to improve performance, but investors still bailed on word of the poor earnings. Still, IBM has made smart moves since then, particularly by announcing a $5 billion stock buyback at the end of April and raising its dividend, so all is not lost for IBM shareholders. Indeed, the ambitious plans to return value to shareholders could tempt some investors to pick up this solid stock on a dip.
GE is another rock-solid stock that took a blow from earnings. The company's quarterly data actually topped analyst projections, even after discounting GE's multibillion-dollar sale of NBCUniversal to Comcast. However, European weakness caused its industrial division to lose 6% in revenue and 11% in earnings, as well as slamming GE's power-generation and water-treatment division. That was enough to send investors fleeing, and this problem won't go away soon: While CEO Jeff Immelt expects total company earnings to improve this year, Europe's manufacturing industry has been in free fall across the continent lately. Even Germany, long the economic foundation of the continent, has seen its PMI dip into contraction territory. Don't expect GE's fortunes across the Atlantic to turn around in any meaningful way soon.
April's biggest loser, however, was topsy-turvy Hewlett-Packard . Perhaps it should come as no surprise that this tumultuous stock topped the Dow's loser list last month, with shares falling a whopping 11.6%. After all, HP is still stuck in its turnaround plans, and the PC market has done it no favors. PC sales experienced their sharpest drop of all time in the first quarter, according to measurement and research company IDC, declining 14% year over year. That's bad news for HP, which still relies heavily on PCs for a significant chunk of revenue.
However, there are signs of hope for this stock, even amid the darkness. HP has pivoted away from PCs recently, looking to expand into growing industries. Even in the PC industry, the firm has committed to growing margins in order to offset revenue declines. It may not be enough to warrant a buy on this beleaguered stock, but HP's far from dead -- despite what that 11.6% drop might suggest.
Is HP poised for a turnaround?
The massive wave of mobile computing has done much to unseat the major players in the PC market, including venerable technology names like Hewlett-Packard. However, HP is rapidly shifting its strategy under the new leadership of CEO Meg Whitman. But does this make HP one of the least appreciated turnaround stories on the market, or is this a minor detour on its road to irrelevance? The Motley Fool's technology analyst details exactly what investors need to know about HP in our new premium research report. Just click here now to get your copy today.
The article April's Worst Dow Stocks originally appeared on Fool.com.Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool owns shares of General Electric Company and International Business Machines. 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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