Wal-Mart Begins to Feel Consumer Slowdown

Wal-Mart

(WMT) - Get Report

just reported a 10% increase in third-quarter profit to $3.14 billion, or 80 cents per share, in the quarter ended Oct. 31, up from $2.86 billion, or 70 cents per share, a year earlier.

The company did beat EPS estimates by 4 cents as sales rose 7.4% to $98.64 billion. The company is recognizing the economic difficulties around the world, and plans to push its position as the lowest-cost retailer with its latest marketing "save money, live better" campaign. The company is also scaling back its store growth and capital expenditures while focusing on remodeling existing locations.

As for the next quarter, management is lowering expectations for EPS to a new range of $1.03 to $1.07, below the consensus of $1.11.

We had removed shares of Wal-Mart from our "Recommended" list back on Oct. 7, when the shares were trading at $57.90. The company has a dividend yield of 1.81%, based on last night's closing stock price of $52.62. The company is trading at 17 times the low end of 2009 EPS estimates. We think the shares are fairly priced and see a flat risk/reward scenario at current prices.

Wal-Mart is not recommended at this time, holding a Dividend.com Rating of 3.4 out of 5 stars.

National Semiconductor Completes Chip Warning Hat Trick

National Semiconductor

(NSM)

reported late Wednesday that it sees its second quarter sales at $420 million to $425 million, down from a September estimate of $470 million to $480 million. The consensus estimates are currently at $461 million.

The company is also cutting nearly 5% of its 7,000 employee workforce. Management is citing a weakened economy that has led to lower-than-expected shipments to customers in the wireless handset market.

The company will be reporting its second quarter earnings on Dec. 8.

We have avoided shares of National Semiconductor since our early June coverage began, and the stock was trading at $23.74. The company has a dividend yield of $2.82%, based in last night's closing stock price of $11.33. The company joins

Applied Materials

(AMAT) - Get Report

and

Intel

, who also warned last night, in calling a slowdown for chip sales. It appears the company could have risk down to the $6 level, which is where it last traded in September 2002. We would look elsewhere for better long-term investing opportunities.

National Semiconductor is not recommended at this time, holding a Dividend.com Rating of 2.9 out of 5 stars.

Applied Materials Cuts 12% of Workforce as Sales Drop

TST Recommends

Applied Materials

(AMAT) - Get Report

reported late Wednesday that its fourth-quarter earnings dropped 45% to $231 million, or 17 cents per share, down from $421.8 million, or 30 cents per share, a year ago.

The company did beat EPS estimates by 3 cents despite sales falling 14% to $2 billion. The company, which makes chip manufacturing equipment is also cutting 1,800 jobs by the end of fiscal 2009.

The earnings report came out just before the Intel warning hit the wires. Intel is one of AMAT's biggest customers, so this will be another issue Applied Materials will face going into 2009.

We have avoided shares of AMAT, since our early June coverage began and the stock was trading at $18.89. The company has a 2.41% dividend yield, based on last night's closing stock price of $9.95. The nearest technical level of support takes us back to a 10-year level in the mid $6 price range. We would prefer bottom-fishing in

Intel

(INTC) - Get Report

, but at this point we think long-term investors need to be aware this is the beginning of the warning cycle and it will likely get worse before it gets better.

Applied Materials is not recommended at this time, holding a Dividend.com Rating of 3.0 out of 5 stars.

Intel Begins Warning Cycle

Intel announced late Wednesday that it now expects sales of $9 billion in the last three months of the year, below previous expectations of $10.1 billion-$10.9 billion.

The company is specifically citing "significantly weaker than expected demand in all geographies and market segments". There is also reluctance from PC makers to buy new chips as they work through existing inventory.

We had removed shares of Intel from our "Recommended" list back on Sept. 9, when the stock was trading at $20.97. We had added the stock on our "Recommended" list back in early August when it was at $23. The company has a dividend yield of 4.14%, based on last night's closing stock price of $13.52. We would not be surprised if the stock shows some resilience here, as the company's 4% yield is certainly attractive.

From a technical standpoint, the stock may have some downside to the $9 level if the future quarters follow this one's performance. Looking at the stock's history, the warnings do come in bunches, so we would not be surprised to see further sales deterioration in early 2009 as well. Investors looking for a long-term play probably can take a bit of a taste here, but we are thinking the shares will likely get cheaper.

Intel is not recommended at this time, holding a Dividend.com Rating of 3.2 out of 5 stars.

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At the time of publication, the author had no positions in stocks mentioned, although positions may change at any time.

Tom Reese and Paul Rubillo are senior editors of Dividend.com. Visit Dividend.com for more dividend stock ratings, picks, news, and analysis for long-term and income-seeking investors.