Procter & Gamble (PG) Tops Estimates on Both Top and Bottom Lines

Packaged goods giant Procter & Gamble (PG: Charts, News) rallied strongly last week, after the company reported strong second quarter earnings that topped analyst expectations on both the top and bottom lines. P&G earned $1.22 per share on revenue of $22.2 billion.

Analysts had expected the company to earn $1.11 per share on revenue of $21.91 billion. Daily Chart
Although consumer staples such as P&G are usually considered safe haven stocks during economic downturns, the prior recession pushed cost-conscious consumers towards generic, off-brand products. This chipped away at P&G's core source of revenue over the past two years. Yet the company's quarterly earnings suggest that customers are buying brand name consumer staples again, thanks to a rebounding economy - and that was great news for P&G, which creates well-known consumer staples such as Head & Shoulders shampoo, Charmin toilet paper and Bounty paper towels. P&G also attributed its stronger profit to reduced costs during the quarter, a result of extended restructuring efforts. Gross margin increased 80 basis points to 50.9%, due to better cost control in all business segments except for health care. P&G increased its investments in its health care supply chain and boosted marketing expenses in emerging markets. Organic sales growth rose 3%, which was in line with its own target of 2% to 4% sales growth for fiscal 2013. Analysts pointed out that P&G's sales growth was not evenly distributed between volume and price increases. Sales in its personal care segment rose due to higher prices, but overall sales volume remained flat. P&G is aiming to increase sales volume while maintaining higher prices, a difficult task recently achieved by European rival Unilever. In its most recent quarter, Unilever's personal care segment was able to raise prices by 2.9% while posting 7.2% growth in sales volume. Looking forward, P&G sees strong and stable growth in 2013. The company raised its EPS and organic growth guidance for fiscal 2013. It also added $1 billion to its share repurchase plan, stating that it intends to buy back $5 to $6 billion in stock. Hedge fund manager William Ackman, who recently made headlines shorting Herbalife (HLF: Charts, News), spearheaded an effort to replace CEO Robert McDonald last summer, after the company lowered its guidance in April. Ackman's Pershing Square owns approximately 1% of Procter & Gamble. However, the company's strong quarter has apparently bought McDonald some goodwill and extra time. P&G states that its next target is to grow sales volume in the second half of fiscal 2013, after costs have stabilized. P&G stock trades at 16.9 times forward earnings with a 5-year PEG ratio of 2.4. The company currently has $6.64 billion in cash, but $33.43 billion in debt - giving it a high debt/equity ratio of 49.65. The stock pays a quarterly dividend of 56 cents per share, a 3.07% yield at current prices. Other News About PG Procter & Gamble Results Help Stem Investor Concerns Procter & Gamble posts a bright second quarter. Breaking Down Procter & Gamble Earnings: The 2013 Turnaround? Is this the start of P&G's long anticipated turnaround? Other Stocks in the News PCs Are So Yesterday Is the Wintel generation officially dead? Chipotle Dissection Down to the Beans Can Chipotle continue to attract growth investors? Copyright 2013 by, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA, Inc.) or its employees responsible.

Published on Jan 29, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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