Dow component Procter & Gamble
For the fourth quarter, net sales advanced 25% to $17.8 billion. Operating income increased 37% to $2.9 billion. Net income jumped 36% to $1.9 billion, or $0.55 per diluted share. For the full fiscal year, net sales increased 20% to $68.2 billion. Operating income moved up 27% to $13.2 billion. Net income expanded 25% to $8.7 billion, or $2.64 per diluted share.
The numbers need to be put into a perspective, however, since P&G's relatively recent acquisition of Gillette is affecting the earnings scenario. Excluding the impact of such acquisitions to concentrate solely on organic growth data, investors will find that P&G still performed decently -- organic sales increased 8% for the quarter and 7% for the full year.
In addition, let's look at the growth of diluted earnings per share on a percentage basis (as opposed to the sole dollar basis I quoted above). Diluted net earnings per share jumped only 6% for the quarter, and only 4% for the full year. The Gillette buyout contributed an estimated $0.06 and $0.08 per share in dilution for the quarter, and between $0.20 and $0.23 per share for the fiscal year. P&G pointed out that without the dilution, the per-share growth rates are in the double digits.
P&G is holding up very well in the current inflationary environment. I guess it's true what they say -- people will still spend money on their favorite household goods, even as product prices and energy costs rise. Margins have improved, and free cash flow rose 34% for the past twelve months (helped out by the Gillette business). In fact, P&G likes to measure free cash flow productivity by seeing what that number represents as a percentage of net earnings. For the year, the productivity was 100%, topping the company's 90% target.
Procter & Gamble is forecasting continued earnings appreciation. It estimates that 2007 will see organic sales growth fall between 4% and 6%, while earnings growth comes in somewhere between 12% and 14%, the latter including the impact of the Gillette dilution. Although Gillette's products are currently seeing weak sales growth, the addition of its battery and blade brands should aid P&G's valuable portfolio going forward.
P&G is a reliable blue-chip company and stock, competing effectively against the likes of Colgate-Palmolive
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