Procter & Gamble's Mixed Quarter is Pushing Shares Higher

P&G just reported a mixed quarter and affirmed its full-year guidance, resulting in a bullish outlook on the stock. Let's see if we should be buyers.

Jan 26, 2014 at 10:00AM

Procter & Gamble (NYSE:PG), one of the world's largest companies, has just released second-quarter results that were mixed compared to analyst estimates. This global giant is in the midst of restructuring its international units, leaving expectations low, so the results are pushing the stock much higher. Let's take a look at the quarter and decide if we should be buying right now or if we should wait to see if the rally can be sustained. 

The worldwide powerhouse
Procter & Gamble, or P&G, is one of the world's leading consumer-goods companies. It is home to the largest lineup of industry-leading brands; in fact, it is home to 25 billion-dollar brands, including Tide, Gain, Downy, Gillette, Charmin, Pampers, Duracell, and Crest. The company currently operates in 70 countries and its products are available in over 180 countries, serving approximately 4.8 billion people.

Pg Screenshot From Website

The report
Second-quarter results for fiscal 2014 were released before the market opened on Friday Here's a breakdown of the report:

Metric Reported Expected
Earnings Per Share $1.21 $1.20
Revenue $22.28 billion $22.35 billion

P&G's core earnings per share decreased 1%, and revenue remained unchanged year-over-year, as organic sales grew 3%. Gross profit fell 1% to $11.15 billion, as a direct result of the gross margin declining 90 basis points to 50%. The highlight of the quarter came in the volume statistics, in which all of Procter's segments showed growth: 

Segment Volume Growth
Beauty 1%
Grooming 2%
Health Care 6%
Fabric/Home Care 5%
Baby/Feminine/Family Care 3%

Volume data aside, the quarterly results may seem bad, but the company faced several charges relating to its restructuring that will eventually result in increased productivity and cost savings; P&G is willing to take the hit now in order to prosper in future quarters and investors should too. It also helped that the company maintained its full-year guidance...

The year's outlook
As a buffer to the better-than-expected earnings results, P&G affirmed its full-year outlook for fiscal 2014, calling for the following results:

Metric Expected Growth
Reported EPS 7%-9%
Core EPS 5%-7%
Net Sales 1%-2%
Organic Sales 3%-4%

Being able to show this decent line of growth is impressive for a company that is restructuring and I think this is the reason the stock is rising in the day's trading. Adding to the bullishness, CEO A.G. Lafley stated, "We expect strong earnings growth in the second half of the fiscal year driven by solid top-line growth, moderating headwinds from foreign exchange, and productivity savings that build throughout the year." I believe in the company and its leaders, making me very bullish on the stock going forward.

Competitor due out shortly
One of Procter & Gamble's largest competitors, Church & Dwight (NYSE:CHD), is about to release earnings of its own. The company is home to brands such as Arm & Hammer, Trojan, First Response, Nair, Oxi Clean, and Kaboom, and is also the leading producer of baking soda in the United States. Its fourth-quarter results are due out on Feb. 4 and the current estimates look like this:

Metric Expected Year Ago
Earnings Per Share $0.66 $0.57
Revenue $823.5 million $809.7 million

These expectations call for earnings per share to increase 15.8% and revenue to grow 1.7% from the same period a year ago. Other than the key metrics, it will be important for Church & Dwight to provide an outlook for 2014 that is within or above Wall Street's estimates; the current expectations call for earnings of $2.77-$2.81 per share on revenue of about $3.2 billion. After Procter's better-than-expected earnings, I am confident that Church & Dwight will also exceed expectations. Take a look at this one if you are not a fan of P&G.


The Foolish bottom line
Procter & Gamble is a global giant that will continue to grow as its restructuring nears completion. On top of price appreciation, the company will return additional cash to shareholders via its healthy 3% dividend which has been raised for 57 consecutive years running. Keep a close eye on P&G and consider buying on any weakness following the rally.

More picks that could beat the market from The Motley Fool
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Joseph Solitro has no position in any stocks mentioned. The Motley Fool recommends Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information