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Home›Accounts›Dow Jones loses 200 points as Exxon Mulls cuts costs, Procter & Gamble increases sales

Dow Jones loses 200 points as Exxon Mulls cuts costs, Procter & Gamble increases sales

By Anita Leet
March 11, 2021
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the Dow Jones Industrial Average (DJINDICES: ^ DJI) was down 0.9% as of 12:55 p.m. EDT Thursday after some rough economic figures were released. U.S. gross domestic product fell 32.9% on an annualized basis in the second quarter, the worst drop since records began in 1947.

As the economy has improved with the reopening of states, the number of Americans claiming unemployment benefits is starting to rise again. Initial jobless claims edged up to 1.42 million for the week ended July 25, a sign the recovery could stall as COVID-19 rises across the country.

The weak performance of the Dow Jones was ExxonMobil (NYSE: XOM). Exxon released its results on Friday, but the stock was down following a report that the oil company is planning major cost cuts to keep its dividend intact. Moving in the opposite direction was Procter & Gamble (NYSE: PG), which has seen increased sales due to the pandemic.

Image source: Getty Images.

Exxon aims to maintain its dividend

Reuters reported Thursday that oil major ExxonMobil plans to implement significant cost cuts, including layoffs, in a bid to preserve its dividend. With the stock falling this year, Exxon’s dividend yield is currently around 8%.

These reported cost cuts come as Exxon grapples with monstrous losses due to low oil prices and depressed demand. The company posted a net loss of $ 610 million in the first quarter, and analysts expect the loss to reach about $ 2.6 billion in the second quarter. Exxon is expected to release its second quarter results before the market opens on Friday.

The company has increased its dividend each year for 37 consecutive years, but it might not be able to keep that streak alive given the scale of its losses. If Exxon maintains its current dividend for the four quarters of this year, it will pay out around $ 15 billion to investors. The company raised $ 9.5 billion by selling bonds in April to consolidate its balance sheet.

With COVID-19 cases soaring in many states, the pandemic is unlikely to end anytime soon. This raises the prospect of a prolonged period of weak oil demand, which could make it difficult for Exxon to avoid a dividend cut.

Exxon shares were down about 4.2% in early Thursday afternoon. The stock has lost around 37% of its value this year.

Procter & Gamble beats estimates

Total revenue rose 4% to $ 17.7 billion for Procter & Gamble in the fiscal fourth quarter, beating analysts’ estimates by $ 730 million. Organic sales increased 6%, driven by strong sales of fabrics and cleaning products. Organic volume increased 8% for the category, while organic sales jumped 14%. In this category, sales of organic home care products jumped 30% due to strong demand for household cleaning and dishwashing products.

Adjusted earnings per share stood at $ 1.16, up 5% year on year and $ 0.15 better than analysts expected. Adjusted gross margin increased 210 basis points due to productivity savings, lower commodity costs and price improvements.

For fiscal 2021, Procter & Gamble expects total revenue to grow 1% to 3%, with organic revenue expected to grow 2% to 4%. Adjusted EPS is expected to grow 3% to 7% from 2020. This outlook includes the impacts of headwinds on currencies and lower commodity costs.

Procter & Gamble stock hit a new 52-week high on Thursday, up 2.8% early in the afternoon. The pandemic has affected parts of Procter & Gamble’s business; the grooming segment, for example, suffered a 4% drop in volume in the fourth quarter. But overall, this seems to be a net positive for the consumer goods company.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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