Consumer goods conglomerate Procter & Gamble (PG - Free P&G Stock Report) reported mixed fiscal third-quarter results (year ends June 30th). And the stock price was down slightly in recent market action.
Earnings per share increased 12% year over year, coming in at $0.96, two pennies ahead of our estimate. But, revenues slipped about 1%, to $15.6 billion (just shy of our $15.8 billion call).
The company has continued to face market headwinds, currency drag and geopolitical interruptions overshadowed its overseas business. And even though increased shipping volume helped bolster organic sales, the impact of minor brand divestitures offset the gains from an improved pricing and product mix. Indeed, during the March quarter, the company experienced top-line weakness in all of its categories save for the health care segment.
Earnings, on the other hand, benefited from P&G's ongoing restructuring efforts. And we imagine cost-cutting initiatives and productivity enhancements will bolster operating margins moving forward.
Meanwhile, the company has boosted shareholder returns. It repurchased about $2 billion of common stock over the past quarter. Plus, the board of directors raised the quarterly dividend 3%, to $0.6896.
Management expects organic revenues will pick up between 2% and 3% this year. In addition, online sales compose about 5% of the top line. And the company may well pursue e-commerce growth to better diversify its revenue streams. However, the aforementioned challenges, including an unfavorable foreign currency exchange environment will likely cause total revenues to slip again in fiscal 2017. In all, we look for the top line to recede about 2% for the full year.
Earnings are liable to climb at a mid- to upper-single digit clip in fiscal 2017. The company's recent streamlining measures, and increased operating efficiency, should continue to lift totals in the coming quarters. What's more, stock buybacks ought to bolster per-share comparisons. We have raised our full-year bottom-line estimate by a nickel, to $3.90 a share.
This blue chip stock may offer limited long-term capital appreciation potential. But it possesses sterling scores for Safety (1) and Financial Strength (A++), and a low Beta (.70), adding to its conservative appeal. Plus, with the recent dividend increase, the stock will likely appeal to investors seeking healthy risk-adjusted income equities.
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.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
