At its shareholder meeting held on Oct 8, 2013 in Cincinnati,
The Procter & Gamble Co.
) declared shareholder value creation to be its top priority and
reiterated the strategic initiatives adopted to improve
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In order to improve the company's operating performance, new
chief operating officer (CEO), A.G. Lafley unveiled a strategy,
which focuses on value creation for shareholders through sales
growth, gross and operating margin expansion and strong cash flow
productivity. The company outlined four steps to achieve its
The company will invest selectively in core businesses, which
include the most profitable categories, brands, markets, channels
and customers. The other three initiatives include, making
strategic, focused investments in innovation and go-to-market
capabilities, accelerating cost savings and productivity
improvements and improving operating discipline.
While the company's U.S. business is stable, P&G is expanding
its presence in the developing markets to capture the increasing
growth opportunities as the developed markets are nearing
saturation. It is also localizing production in developing
countries to improve customer service and lowering supply chain
costs to boost margins. The company's volume and market share
growth trends in the developing markets have been encouraging.
Procter & Gamble generates strong free cash flow annually,
which allows it to invest in product innovations, acquisitions
and brand development as well as return shareholders through and
buyback and dividend distribution The company repurchased shares
worth $6 billion in fiscal 2013, $4 billion in fiscal 2012 and $7
billion in fiscal 2011. In fiscal 2014, the company expects to
repurchase $5 billion-$7 billion shares.
Moreover, since its incorporation in 1890, P&G has continued
to pay dividends for 123 consecutive years. The 7% dividend hike
in April was the 57th consecutive year of dividend increase.
Impressively, over the last 10 years, P&G has returned $98
billion of cash to shareholders, through both dividend and share
buybacks, which is 90% of its reported earnings.
P&G carries a Zacks Rank #3 (Hold). Though all its
afore-mentioned plans sound encouraging, we prefer to wait until
these drive substantial organic revenue growth. Moreover,
challenging consumer spending environment in the U.S. and
volatile market dynamics in other countries remain overhangs.
Other consumer staples stocks that are worth considering include
Pinnacle Foods Inc.
Green Mountain Coffee Roasters, Inc.
Inventure Foods Inc.
). While Pinnacle Foods carries a Zacks Rank #1 (Strong Buy),
Green Mountain and Inventure Foods hold a Zacks Rank #2