Why Procter & Gamble Raised a Ruckus in 2012

The year is nearing its end, and now is a good time to look at what happened throughout 2012 to the stocks you follow. If you know the important things a company achieved, as well as any challenges it failed to overcome, then you can make a better decision about whether it deserves a spot in your portfolio.

Today, I'll look at Procter & Gamble (NYSE: PG  ) . As a member of the Dow Jones Industrials (DJINDICES: ^DJI  ) , the consumer goods giant is known around the world for its well-regarded brand names, more than two dozen of which sport annual sales of $1 billion or more. Yet the company has come under scrutiny from activist investors in an effort to boost its flagging revenue growth. Below, you'll find more on what moved shares of Procter & Gamble in 2012.

Stats on Procter & Gamble

Year-to-Date Stock Return

8.9%

Market Cap

$192 billion

Total Revenue, Trailing 12 Months

$82.9 billion

Net Income, Trailing 12 Months

$10.5 billion

1-Year Revenue Growth

0.5%

1-Year Earnings Growth

(10.2%)

Dividend Yield

3.2%

CAPS Rating

*****

Source: S&P Capital IQ.

What's going on with Procter & Gamble this year?
P&G has enjoyed great long-term success, thanks to its strong brand loyalty. When times are tough, though, consumers look to pinch pennies wherever they can, and that has led to sales leveling out as some customers downgrade to cheaper, private-label brands or generics.

Moreover, rising commodity costs have hit the entire industry. Unilever (NYSE: UL  ) cited higher expenses and tighter competition in explaining its declines, while Kimberly-Clark (NYSE: KMB  ) and Colgate-Palmolive (NYSE: CL  ) have similarly dealt with more expensive raw materials, stressing earnings and pushing stock multiples to high levels.

But some of P&G's problems are unique. Despite its global reach, the company has neglected emerging markets in recent years, allowing Unilever and Colgate-Palmolive to gain back ground. With three years of reduced profit expectations under its belt, P&G has finally attracted the attention of activist investor Bill Ackman, who believes CEO Robert McDonald is to blame for the problems and should leave the company.

In response, P&G now plans a big push toward innovation, potentially making even its existing products obsolete. McDonald argues that the company can get sales moving back in the right direction by focusing on its biggest products and engaging in cost-cutting.

P&G hasn't done badly by investors, but it has left some money on the table in 2012. Successful initiatives could make it a much better performer in the years to come.

P&G isn't the only consumer giant to face controversy. Over the years, Johnson & Johnson has dealt with numerous product recalls that have damaged its brand. Is J&J still a smart long-term buy, or should you give up on the stock? To understand how J&J addressed some of the same challenges P&G faces now, check out our brand-new premium report on Johnson & Johnson. To claim your copy simply click here now for instant access.

Click here to add Procter & Gamble to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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