Consumer goods giant Procter and Gamble (PG – Free Procter and Gamble Stock Report) has issued fiscal first-quarter earnings. (Fiscal year ends June 30, 2020). Overall, the Dow-30 component put out a solid report, and the stock moved up more than 3% in value in response.
Core earnings came in at $1.37 for the September period, a hearty 22% above the year-ago figure of $1.12 a share, as sales climbed 7% year over year.
Despite concerns about tariff and trade headwinds, operational results improved nicely, thanks to higher shipment volume, firmer pricing, and a positive sales mix. The improved product mix was driven by the disproportionate growth of the Personal Health Care and Skin and Personal Care categories and strong growth in Japan, all of which have higher than average selling prices. Sales growth in Japan was largely driven by an increase in retailer inventories ahead of a planned VAT increase in October 2019, contributing approximately 40 basis points to overall margin growth in the quarter, which primarily benefited the Beauty, Fabric, and Home Care & Baby businesses.
In addition, Procter's restructuring and cost-cutting measures have begun to take hold. Over the last few quarters, the company has been working to improve productivity and widen margins, which has helped offset the pressure from rising input costs and foreign exchange fluctuations.
Too, P&G ought to focus on supporting its brands and gaining market share. To this end, the company has ramped up marketing and advertising campaigns. Plus, packaging improvements should boost the eye appeal of its household products. And it has strengthened retail execution, widened its distribution network, and bolstered its e-commerce business, which ought to help it gain shelf space. Meanwhile, product innovation and development will likely remain key priorities.
Looking ahead, we believe the aforementioned growth efforts will continue to take hold as the year progresses. As such, we are maintaining our fiscal 2020 top- and bottom-line estimates. Core earnings should gain 5%-10%, to $4.85 a share, while sales increase 3%-5% to $7.025 billion.
These shares have been climbing steadily over the last few months. And the consumer goods maker stock's defensive qualities, and above-average scores for Financial Strength and Safety adds to its conservative investment appeal. Plus, the equity offers an attractive dividend yield. On the other hand, much of the capital appreciation we envision is already baked into the recent quotation.
About The Company:The Procter & Gamble Company makes detergents, soaps, toiletries, foods, paper, & industrial products. Brands include: Head & Shoulders, Olay, Pantene, SK-II, Wella, Fusion, Gillette, Mach 3, Presobarba, Crest, Oral-B, Vicks, Ariel, Dawn, Downy, Febreze, Gain, Tide, Always, Bounty, Charmin, and Pampers.
– Orly Seidman
