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 (NYSE:KFT) soared on impressive earnings despite a noticeable slowdown in case volume. Unilever plc (NYSE:UL) suffered a sell-off on similar volume results. And Kimberly-Clark (NYSE:KMB) went back to the well for more price increases.

But yesterday we saw Procter & Gamble (NYSE:PG) prove once again that it is the gold standard in this sector. Why the gold standard? Because P&G snagged a triple play in its most recent quarter with higher prices, volume growth, and expense leverage to boot. I classify free cash flow at 96% of net earnings as icing on the cake, because calling it a quadruple play would make the baseball analogy sound a bit silly.

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.

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