This has been a crucial earnings season for many companies, with negative expectations going in, and widespread fear of a slowing economy. For a few companies, though, the stakes have been even higher. For Procter & Gamble (PG -0.92%), this report was a final chance for the company and its CEO to prove that it still has the ability to impress investors and turn around the negative sentiment surrounding the company for the last few months. Overall, the numbers looked positive, but will it be enough to stave off angry investors who want new blood in the C-suite? Let's take a closer look at the most recent earnings of the company with 26 'billion dollar brands.'

Sigh of relief
For Bob McDonald, the commander in chief of Procter & Gamble, it's been a stressful few months. Starting with a strong suggestion from famed value activist Bill Ackman to bring in a new CEO, investors and analysts have questioned whether McDonald has what it takes to turn around PG's recent misfortune. Rising costs, and a few missed product initiatives, had very few bulls on the stock until this week's earnings release -- which surpassed analyst expectations, and sent the stock to a four-year high.

McDonald had been trying to assuage investors the best he could. For months now, the CEO has pushed his cost-cutting and product-refocusing plans to turn the company around. The plans included shedding upwards of 5,700 jobs -- which, he estimates, will save around $10 billion by 2016. McDonald also said that the company would retool its focus to the 40 most profitable products in an effort to boost top line revenue.

These initiatives were aimed at plugging the hole in the bottom of the $190 billion ship that had seen profits sink for three years straight, and caused management to reduce earnings guidance three times this year alone. In this era of shareholder activism, Procter & Gamble was shaping up to be a giant bullseye for those with the energy to take it on. Of course, leave it to activist extraordinaire Bill Ackman, whose Pershing Square fund recently took a massive $1.8 billion position in the company to encourage managerial enhancement.

It looks like, for now at least, Ackman may not get what he wants -- at least not in the form of a new chief. McDonald's initiatives appear to be paying off according to these results:

  • "Core" earnings per share were $1.06, beating analysts' $0.96 expectations
  • Operating profit margin grew by 90 basis points -- a sign that the cost cutting is taking effect.
  • $2 billion of free cash flow, above the company's own estimates.
  • After-tax profits in top 10 regions to increase 35% over last year.
  • Market share trends look to be reversing -- gaining traction in toothpaste and laundry detergents.

For a company that was, just weeks ago, considered a chronic underperformer, these are some very encouraging results. Despite these impressive gains, the company maintains most of its full-year forecasts.

Put away the resume
It looks like McDonald has bought himself some time with this report. And it certainly helps that competitor Colgate (CL -0.55%) posted so-so results, and announced layoffs to more nimbly navigate emerging markets. The company met analyst expectations, but failed to impress analysts and investors amid growing concerns. PG emerged the stronger company, but this is just the first step on the path back to greatness and, for McDonald, to job security.

Looking ahead
After a plant explosion in Japan, the company needs to obtain new absorbent material for diapers, and still has to prove the efficacy of its new products set to be launched throughout the fiscal year. The cost cutting has worked for now, but the really tough part remains -- to once again become a company that can determine consumer trends before they happen.

Health and beauty products should boost sales for the fourth quarter, because the company is rolling out several top-tier cologne and perfumes, as well as Olay skin products, in time for the holiday seasons.

For McDonald, this quarter certainly gets marked as a win, but he needs to further prove his ability to take back market share in order to get Ackman and other disgruntled investors off his back.