The Procter & Gamble Company: What to Watch For in Friday's Earnings Report

Procter & Gamble stock performed well in 2013, soaring to new all-time record highs. But can the consumer-products giant ride that momentum higher? Find out here.

Jan 22, 2014 at 11:25PM

Procter & Gamble (NYSE:PG) will release its quarterly report on Friday, and investors have watched the stock hit new all-time record highs in November before falling back in the past two months. Despite the optimism, Procter & Gamble earnings face pressure from international giant Unilever (NYSE:UL) as well as domestic rivals Colgate-Palmolive (NYSE:CL) and Kimberly-Clark (NYSE:KMB). The question facing investors is whether P&G can sustain its longtime competitive advantages against its rivals and bolster its growth.

Procter & Gamble has a place in billions of households around the world, with a huge stable of billion-dollar-selling brands in its consumer-products arsenal. Yet despite the promise of global growth from a rising middle class in emerging-market economies, P&G has had to deal with sluggish revenue gains from its core business. How can the company make the most of the huge opportunities it has? Let's take an early look at what's been happening with Procter & Gamble over the past quarter and what we're likely to see in its report.

Pg

Stats on Procter & Gamble

Analyst EPS Estimate

$1.20

Change From Year-Ago EPS

(1.6%)

Revenue Estimate

$22.35 billion

Change From Year-Ago Revenue

0.8%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Can Procter & Gamble earnings start growing faster again?
In recent months, analysts have pulled back on their views about Procter & Gamble earnings, cutting their fourth-quarter estimates by $0.03 per share and their full-year fiscal 2014 and 2015 projections by a penny per share each. The stock is essentially unchanged from mid-October levels, despite having been up significantly earlier in the quarter.

Procter & Gamble's third-quarter results gave investors new hope that the company can restore its strength through global growth. Organic sales in emerging markets grew by 8%, well outpacing its domestic organic growth of 2%. By contrast, Unilever, which has had a much better history in recent years in capitalizing on emerging markets, had relatively weak performance there, suggesting some customer shifting of demand toward P&G. It appears likely that P&G's strategy to narrow its focus on just 10 key emerging nations has paid off by helping the company better address specific needs of certain demographic groups. More broadly, the company's revenue gained 2%, leading to an 8% jump in net earnings per share with solid results from the Fabric Care and Home Care segment as well as the Baby, Feminine, and Family Care business.

Still, some investors believe that smaller rivals Kimberly-Clark and Colgate-Palmolive have more growth potential. The problem, though, is that P&G stock looks most attractively valued even considering its growth prospects, with superior profit margins and a healthier balance sheet than either of its two domestic competitors. Kimberly-Clark, by contrast, has taken a higher-risk profile with its more concentrated portfolio of paper-based personal-care products. That has paid off thus far, but P&G's more diversified approach could make it a safer play going forward.

Moreover, Procter & Gamble has made efforts to restructure its operations to improve efficiency. That's been a necessary response to similar efforts at Unilever and Colgate-Palmolive, with Unilever having boosted its personal-care exposure while Colgate has bought a key European oral-care company to strengthen its namesake dental brand. For Procter & Gamble, expanding its worldwide beauty and grooming business to incorporate a more focused product line addressing baby products, beauty, health and grooming, and fabric and home care on a global basis could give it more international growth power.

In the Procter & Gamble earnings report, watch to see whether the company is able to sustain superior organic growth compared to its rivals. With investors worrying about the stock's price, a dose of growth power could restore confidence and send the stock to new record highs once again.

Does Procter & Gamble make the final cut?
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

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

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool recommends Kimberly-Clark, Procter & Gamble, and Unilever. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers