Shares for Dell Inc. (NASDAQ:DELL) fell 6.5% Wednesday after the personal computer maker’s outlook for the First Quarter of Fiscal Year 2013 included a 7 percent overall decline in sales.
The stock, which has an annual Earnings Per Share of $1.88 currently with a market capitalization of $30.65 billion, has risen more than 16% so far in the calendar year from its $14.63 January opening price. However, at midday Wednesday, shares of Dell were trading at $17.00 – a sharp drop from Tuesday’s closing price of $18.21.
Citigroup downgraded Dell Inc. shares Wednesday from Buy to Neutral, citing foreseen difficulties for the world’s third largest PC maker’s ability to increase its earnings margins in the near future. Citigroup also reduced its target price for the stock from $20 to $19 and added that it is not likely the company will be able to continue passing on cost increases to customers.
4Q FY 2012 Results
On Tuesday, Dell Inc. released its Official 4Q and FY 2012 Results, which boasted annual revenue of $62.1 billion with $16 billion of those sales coming in the Fourth Quarter of Fiscal Year 2012. Its Enterprise Solutions and Services sales for the year were reported at a record $18.6 billion with $4.1 billion in the 4Q while Fiscal Year 2012 Cash Flow was $5.5 billion.
Chairman and CEO Michael Dell told investors Tuesday, “Our customers think of Dell in much broader terms now, trusting us with their comprehensive IT needs, from the data center to the device. We are more committed than ever to both developing and investing in innovative solutions that deliver greater value and better outcomes for our customers.”
Chief Financial Officer Brian Gladden added, “The expanding mix of revenue and earnings from enterprise solutions and services is critical to our future. Our full-year results are a strong reflection of the significant progress we made this year on our strategic priorities.”
Despite the positive statements from Dell’s CEO and CFO, a closer look at the comparative numbers shows a trend of dwindling profits for the computer maker. Dell’s overall revenue for the 2012 Fiscal Year of $62 billion was only a 1 percent increase from FY 2011. What’s more, the 4Q FY 2012 quarterly numbers were shockingly lower than a year ago, with Operating Income down 19%, Net Income off 18%, and Earnings Per Share coming in at 10 percent lower than in 4Q FY 2011.
The full year numbers were still very impressive compared to Fiscal Year 2011, but many market analysts expect the reduced profit margin trend experienced by Dell in 4Q FY 2012 to continue throughout Fiscal Year 2013.
Below are the Intraday Trading and Year To Date stock charts for Dell Inc.
Stock Market Retreats
The U.S. stock market took a breather Wednesday from its recent gains, as all three major indices retreated. At 12:30pm Eastern Time, the Dow Jones had lost 0.3 percent to 12,926 points, the NASDAQ Composite had dropped 0.56% to 2,932 and the S&P 500 was down 0.4 percent to 1,356 points.
The broad based decline is the result of questions concerning global economic growth in 2012 along with worries that the Greek bailout package will not be enough to ultimately save the country from an all-out default at a later date.
Sovereign debt concerns related to EU countries such as Portugal and Spain have also rekindled now that the Greek situation has been temporarily postponed.
Dell Inc. and Your IRA
If you have Dell Inc. in your IRA, then you took a 6.5 percent hit on your investment Wednesday due to a weaker sales outlook for the world’s third largest PC maker. Before making any important investment decision, it is a good idea to consult a Certified Financial Planner. You can click on the following link to Find an Advisor in your area who can help you reach your long-term investment goals.
For individuals who would like to find out more about IRAs, visit our sections on the IRA Rules and IRA Basics to find out more. Once you’re ready to get started, you can Open an IRA through us for as little as $1 in a matter of minutes.