Consumer-products companies are having an up-and-down time this year. All of them have been attempting to cover commodity cost increases by raising prices, with varying degrees of success. Kraft Foods
But yesterday we saw Procter & Gamble
P&G's fourth-quarter growth rates:
- Total sales up 10% -- attributable to: volume, 3%; pricing, 3%; foreign exchange/other, 4%
- Gross profit: 7%
- SG&A expenses: 3%
- Operating profit: 13%
- Diluted EPS: 37%
Higher commodity and energy costs cut into gross margins by 300 basis points, with half the impact offset by pricing, cost savings, and scale leverage. SG&A expenses were leveraged 210 basis points, yielding quality operating income growth of 13%. The fillip-to-earnings-per-share growth was due to P&G adjusting tax reserves.
Management affirmed their estimates for next year, noting they expect the effects of commodity cost increases to peak in the upcoming July-to-September quarter.
I hate to sound like I'm gushing over any stock; no company gets it right all the time. But these days P&G is looking like it found the Easy button. If you don't own a piece of this gold standard, you should consider it. At $68, the stock is trading at a reasonable 20 times trailing-12-month earnings (reasonable for P&G). Management looks to be on their customary roll, and if oil prices continue their recent downward trends, look for earnings growth to accelerate as cost pressures ease. A triple play if I ever heard one.
For related Foolishness:
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Fool contributor Timothy M. Otte surveys the retail scene from Dallas. He welcomes comments on his articles, and owns shares of Kraft, but none of the other companies mentioned in this article. The Fool has a disclosure policy.