The Procter & Gamble Company
PG, popularly known as P&G, is gaining momentum on the back of
robust surprise trend due to ongoing initiatives to improve
productivity. Moreover, the company remains focused on improving
its product portfolio through strategic initiatives. It is also on
track with its cost-saving plans.
All these factors helped the company to deliver robust
third-quarter fiscal 2019 results, wherein the top and bottom lines
surpassed the Zacks Consensus Estimate and improved year over year.
Driven by these upsides, shares of this Cincinnati, OH-based
company have rallied approximately 44% in the past one year
outperforming the industryâs growth of around 30%.
Factors Narrating Procter & Gambleâs Growth
Procter & Gamble remains focused on productivity and
cost-saving plans to boost margins. The companyâs continued
investment in business, alongside efforts to offset macro cost
headwinds and balance top and bottom-line growth, underscore its
productivity efforts. With cost savings and efficiency improvements
across all facets of business, the company is nearing the mid-point
of the second five-year (fiscal 2017-2021) cost-savings target of
Additionally, the company emphasizes on improving its product
portfolio through strategic initiatives, which enable it to
concentrate on its fast-growing businesses. For this, it relies on
its strategy of acquiring complementary businesses. The company
also follows a systematic divestiture plan to streamline its
portfolio. Notably, it has acquired a private company â This is L.
â that produces period products with natural ingredients. This will
aid in expanding its naturals product range, which is a key focus
area for most day-to-day consumer product companies at
Some other recent acquisitions include the beauty brand â First Aid
Beauty, the consumer health business of Germany-based Merck KGaA
and Walker & Company Brands, all in 2018. These acquisitions
should bolster the companyâs product portfolio in various
categories. Simultaneously, it divested several assets over the
years as part of the portfolio-reshaping plan.
These actions have been driving the companyâs robust quarterly
performance over the years. Furthermore, managementâs raised sales
guidance for fiscal 2019 reflects its confidence in growth for the
future. It now projects all-in sales growth of flat to up 1% versus
the range of down 1% to up 1% mentioned earlier. Organic sales are
now estimated to increase 4% compared with 2-4% stated
earlier. The raised sales view is attributed to robust
organic sales growth in the most recent quarter. Moreover, the
company continues to anticipate core EPS growth of 3-8% for fiscal
2019. Core earnings were $4.22 per share in fiscal 2018.
However, Procter & Gamble has been witnessing strained margins
owing to increased commodity and shipping costs, higher brand
investments amid intense competition. Intense competition and
adverse currency remain other constraints to margin. While
P&Gâs core gross margin remained flat year over year in
third-quarter fiscal 2019, core operating margin contracted 60
Although the companyâs cost-saving initiatives contributed
meaningfully to margin expansion, this was not enough to negate the
ongoing headwinds. Notably, core operating margin contracted for
seventh consecutive quarter. While pricing gains slightly cushioned
negative margin trends in the fiscal third quarter, the company
expects currency headwinds, higher business investments,
competitive dynamics and commodity costs to weigh on margins in the
near term. Moreover, adverse currency rates are hurting the
companyâs results, which may persist in fiscal 2019.
Nonetheless, we expect all aforementioned factors to offset minor
hurdles and help bolster this Zacks Rank #3 (Hold) stockâs
Unilever N.V. UN has a long-term earnings growth rate of 8.2% and
sports a Zacks Rank #2 (Buy). You can see the complete list
of todayâs Zacks #1 Rank (Strong Buy) stocks here.
Colgate-Palmolive Company CL has a long-term earnings growth rate
of 5.4% and a Zacks Rank #2.
The Clorox Company CLX has a long-term earnings growth rate of 5.5%
and a Zacks Rank #2.
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