Consumer goods conglomerate Procter & Gamble (PG – Free P&G Stock Report) issued fiscal fourth-quarter and full-year results (fiscal 2019 ended June 30th). The Dow-30 component closed the year on a better-than-expected note, and investors seemed pleased, sending the shares up nicely.
Core earnings increased 17% for the June quarter, to $1.10 a share, three pennies ahead of our estimate, and the bottom line climbed 7%, to $4.52 a share, for the full year. Sales advanced 4% for the quarter, to $17.1 billion (handily beating our $16.7 billion outlook) and inched ahead 1%, to $67.7 billion, for the full year.
However, we should note, P&G notched a $2.12 per-share loss for the June period, and diluted share net tumbled 61%, to $1.43 for the full year, due mainly to a large writedown at its Gillette Shave Care business (an $8 billion non-cash goodwill charge). That said, management implied that it does not plan to put its razor subsidiary on the auction block.
Even though higher operating expenses and currency fluctuations tempered Procter's performance over the past few months, strong sales growth and margin expansion more than offset those headwinds. Indeed, ongoing productivity improvements helped bolster profits. Meanwhile, P&G has been fighting for market share. It has been ramping up its e-commerce business and increasing marketing and branding efforts to widen its customer base.
Too, the recent addition of Merck's (MRK – Free Merck Stock Report) over-the-counter business should contribute to the top line. And P&G may eye other strategic acquisitions or consider divestitures to strengthen its portfolio.
The company has been rewarding shareholders through stock buybacks and dividends. And management estimates it will repurchase between $6 billion and $8 billion of its common shares, and distribute more than $7.5 billion in dividends in fiscal 2020.
Overall, we believe fiscal 2020 will shape up nicely. Management's ongoing growth measures should continue to support the top and bottom lines in the upcoming quarters. As such, we look for sales to climb 3%, to $69.7 billion, and for core earnings to increase at a mid- to high-single-digit clip, coming in at $4.85 a share this year.
The blue chip stock has gained a lot of ground over the past year. And we imagine the company's strong brand names and defensive qualities, combined with strategic business improvements, will set the stage for healthy growth opportunities moving forward. Plus, PG offers an above-average dividend yield. On the other hand, these shares do not stand out for their long-term price appreciation potential.
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
