Cisco Systems Inc. and Fossil Group Inc. Drop as Stocks End a Brutal Week

By Demitrios

Stock ended lower by more than 1% today, capping a rough week for U.S. markets. The S&P 500 (SNPINDEX: ^GSPC)lost 1.2% and the Dow Jones Industrial Average(DJINDICES: ^DJI) gave up 1.1%. Stocks shed nearly 4% in the past five trading days:

^INX data by YCharts

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An interest rate hike by the Federal Reserve, its first boost since 2006, seems likely in the next few weeks. 92% of economists polled by The Wall Street Journal today said they expect the increase to come in December.

Meanwhile, several stocks made sharp moves today including Dow member Cisco Systems and struggling watch and accessories maker Fossil , which each reported quarterly earnings results before the opening bell.

Cisco sees a weak fourth quarter aheadNetwork technology giant Cisco Systems was the Dow's biggest percentage-point loser today, falling 6% after its fiscal first-quarter earnings announcement disappointed investors. The operating results weren't the problem. In fact, Cisco's 4% sales growth was at the high end of management's guidance and just ahead of Wall Street's expectations. Profits also came in ahead of plan at $0.59 per share compared to consensus estimates of $0.56 per share. "Q1 was a very strong quarter," CEO Chuck Robbins said in a press release.

However, Cisco's soft outlook for the current quarter was surprisingly weak. While still calling for growth, a recent slowdown in orders has management feeling conservative about the next few months. "Our guidance reflects lower than expected order growth in Q1, driven largely by the uncertainty of the macro environment and currency impacts," Robbins said. Cisco's projected 1% revenue gain was well below the 5% consensus that Wall Street analysts had wanted. And its expected $0.54 per share of earnings also came up short (estimates centered on $0.56 per share).

In a conference call with investors last night, Cisco's management said the company is moving quickly to adjust to the changing demands of its customers, for example by releasing new products at a 25% faster pace than the prior year and by aggressively moving into the cloud business. "We expect the results of these moves will start showing up in the coming quarters," Robbins said.

Fossil struggles against tech disruptors Fashion accessory maker Fossil saw its stock crater by 37% today on 20 times its average daily trading volume. The catalyst for that huge swing was a third-quarter earnings report that showed evidence of a fundamental shift in the company's biggest market: watches.

Image source: Fossil.

An 11% decline in the watch category was the main driver of a 16% overall sales drop, which was well below management's plan. Net income plunged to $58 million from $104 million in the year-ago period. "We are not satisfied with our overall performance," CEO Kosta Kartsotis said in a press release.

In a subsequent conference call with investors, executives described what they saw as a broad move by customers away from traditional timepieces and toward wearable technology. This shift is putting pressure on sales growth, but the resulting tech opportunity is why the company just purchased fitness tracker producer, Misfit. "We believe some of the headwinds we have been experiencing result from a lack of technology in our core business, and this acquisition will allow us to quickly start turning those headwinds into tailwinds."

Any turnaround will have to wait until at least next year, though. Fossil lowered its sales and profit outlook and said it expects revenue to sink by as much as 11% next quarter. Earnings are now projected to fall 17% for the full year, down to $5.90 per share.

The article Cisco Systems Inc. and Fossil Group Inc. Drop as Stocks End a Brutal Week originally appeared on

Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems and Fossil. 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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