As Safeway Net Falls 25%, It Trims Full-Year Forecast, but Raises Dividend

Supermarket operator Safeway ( SWY) said Thursday that its first-quarter profit fell 25% from last year.

The Pleasanton, Calif.-based company reported fiscal first-quarter net income of $144.2 million, or 34 cents per share, down from $193.4 million, or 44 cents per share, in the year-ago period. Revenue fell 8% to $9.24 billion.

Both profit and revenue results fell short of estimates. On average, Wall Street analysts expected 40 cents per share revenue of $9.86 billion.

Safeway said that sales fell mainly because of lower fuel prices and negative effects of the stronger dollar on the company's Canadian operations. Excluding fuel sales, the company said that same-store sales, considered the key indicator of a retailer's health, fell 0.7%.

The company lowered its full-year 2009 guidance to $2.10 to $2.30 per share, down from previous estimates of $2.34 and $2.44 per share. On average, analysts expect $2.23 per share.

One piece of good news to come out of the report is that Safeway is raising its dividend by 25%, from 8 cents to 10 cents quarterly.

Safeway shares fell $1.72, or 8%, in morning trading Thursday.

We have avoided shares of SWY since our early June coverage began, when the stock was trading at the $31 level. The company has a dividend yield of 1.50%, based on last night's closing stock price of $21.12. The stock has technical support around the $16 level. If that fails to hold, we could potentially test the $9-$10 mark If the shares can bounce back, we see overhead resistance around the $24 level. We would look elsewhere for a better investment opportunity at this time.

Safeway is not recommended at this time, holding a Dividend.com DARS Rating of 2.8 out of 5 stars.

Exxon Mobil First-Quarter Profit Falls 58%, Missing Estimates

Oil juggernaut Exxon Mobil ( XOM) said Thursday that its first-quarter profit slipped substantially from the same period last year as it struggled to offset lower oil prices and demand.

The Irving, Texas-based company reported fiscal first-quarter net income of $4.55 billion, or 92 cents per share, down 58% from $10.89 billion, or $2.02 per share, in the year-ago period. Revenue fell 45% to $64 billion from $116.9 billion.

On average, Wall Street analysts expected net income of 95 cents per share on revenue of $54 billion.
  • Exxon spent $5.8 billion on exploration and development in the first quarter, up 5%.
  • Oil and gas production rose slightly to 4.2 million barrels of oil equivalent per day, in line with analyst projections.
  • Upstream earnings plummeted 60% to $3.5 billion.
  • Profit from refining and marketing dropped 3%% to $1.13 billion.

The company also intimated that it spent $7.9 billion in the first quarter in share-buybacks, purchasing 107 million shares of its own stock.

Exxon shares fell $1.54, or 2.2%, in morning trading Thursday.

We had removed shares of XOM from our "Recommended" list back on July 31, when they traded at $84.38. The company has a dividend yield of 2.45%, based on last night's closing stock price of $68.44. The stock has technical support in the $62-$65 price area. If the stock can firm up, we see overhead resistance around the $72-$75 levels. We would remain on the sidelines for now.

Exxon Mobil is not recommended at this time, holding a Dividend.com DARS Rating of 3.4 out of 5 stars.

Procter & Gamble Third-Quarter Profit Falls Nearly 4%, Full-Year Guidance Trimmed

Consumer products maker Procter & Gamble ( PG) said Thursday that its third-quarter profit fell 4% from the previous year, as consumers continue to curb spending during the economic recession.

The Cincinnati-based company reported fiscal third-quarter net income of $2.61 billion, or 84 cents per share, compared to $2.71 billion, or 82 cents per share, in the year-ago period. These results reflect fewer shares outstanding after the company sold its Folgers coffee business to J.M. Smucker ( SJM) last year in a $2.95 billion stock deal.

Revenue for the quarter fell 8% to $18.42 billion, including negative effects from the stronger dollar.

On average, Wall Street analysts expected earnings of 80 cents per share on revenue of $18.9 billion.

The company, which has seen sales slip recently as consumers turn to lower-cost generic alternatives to its products such as Tide detergent and Pampers diapers, said that it now expects net sales to slump 2% to 4% for the year, and sees organic sales (which exclude currency and other effects) to grow 2% to 3%.

Procter also trimmed the high end of its full-year earnings forecast to $4.20 to $4.25 per share, from $4.20 to $4.35. On average, Wall Street analysts expect $4.21.

Procter & Gamble shares fell $1.26, or 2.5%, in morning trading Thursday.

Despite the company cutting the outlook, we are still comfortable holding shares at current levels. We will be monitoring the stock closely and will let subscribers know if there are any ratings changes.

P&G is a "recommended" dividend stock, holding a Dividend.com DARS Rating of 3.5 out of 5 stars.

Travelers' First-Quarter Profit Falls 32%; 2009 Guidance Reaffirmed below View

Property and casualty insurance giant The Travelers Companies ( TRV) said Thursday that its first-quarter profit fell 32% from last year, mainly due to investment losses.

The St. Paul, Minn.-based company reported fiscal first-quarter net income of $662 million, or $1.11 per share, compared with $967 million, or $1.54 per share, in the year-ago period. Excluding $137 million in net realized investment losses, the company earned $799 million, or $1.34 per share.

Overall revenue fell 8% from the previous year to $5.74 billion.

On average, Wall Street analysts expected a profit of $1.31 per share on revenue of $6.12 billion.

Travelers' combined ratio for the first quarter rose to 90.6% from 87.6%. An insurer's combined ratio is considered a key indicator of the company's health, since it measures how much money it pays out in claims vs. how much money it generates from writing new premiums. The lower the combined ratio, the better.

The company reaffirmed its 2009 full-year guidance for operating income of $4.50 to $4.90 per share, well below the average analyst estimate for $5.39 per share.

Travelers shares fell $2.36, or 5.5%, in morning trading Thursday.

We just removed shares of Travelers from our recommended list this morning. We were surprised at how poorly the insurer performed, especially with the increase in the company's combined ratio. We will keep tabs on the company, but we are moving to the sidelines for now.

Travelers is not recommended at this time, holding a Dividend.com DARS Rating of 3.4 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks as well as a detailed explanation of our ratings system.

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.

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