We expect consumer giant,
The Procter & Gamble Company
) to beat expectations when it reports second quarter fiscal 2013
results on Jan 25 before the market opens.
Why a Likely Positive Surprise?
Our proven model shows that P&G is likely to beat earnings
because it has the right combination of two key ingredients.
Positive Zacks ESP:
Earnings ESP (Expected Surprise Prediction) (Read:
Zacks Earnings ESP: A Better Method
), the difference between the Most Accurate estimate of $1.13 and
the Zacks Consensus Estimate of $1.11, stands at +1.80%.
Zacks #3 Rank (Neutral):
P&G currently carries a Zacks Rank # 2 (Buy).
The combination of the stock's Zacks Rank #2 (Buy) and +1.80%
ESP make us confident of a positive earnings beat on Jan 25.
What is Driving the Better Than Expected Earnings?
The fourth quarter 2012 and first quarter 2013 was a
turnaround period for this maker of Olay shampoo and Tide
detergent. In the earlier quarters, slowdown in developed nations
and commodity cost increases led to a series of disappointing
earnings results and guidance cuts for P&G. P&G's fourth
quarter 2012 and first quarter 2013 results exceeded the
performance in the past quarters.
P&G's first quarter earnings were significantly better
than the Zacks Consensus Estimate and improved 5% from the
prior-year level driven by organic sales growth, lower commodity
cost headwinds and improved productivity. Though net sales
declined, they were at the favorable end of management's
expectations. The company also provided a bright outlook for the
second quarter as well as the fiscal year.
For the second quarter of fiscal 2013, the company expects
revenues to range between negative 1% to a positive 1%. Organic
sales are expected to grow between 1% and 3%. Foreign exchange is
expected to hurt revenue growth by 2% while pricing is expected
to add 2% to sales growth. Core earnings are expected to remain
in the range of $1.07 to $1.13, representing a movement in the
range of negative 2% to positive 4%. In the quarter, the company
expects market growth to slow down while its marketing plans to
strengthen. The Zacks Consensus Estimate stands at $1.11, which
is within the guidance range.
Estimates have mostly moved upwards after the announcement of
the first-quarter results and the upbeat outlook for the upcoming
quarter and fiscal year. The Zacks Consensus Estimate for fiscal
2013 grew 1.5% over the last 90 days to $3.97, reflecting
year-over-year earnings growth of 3.07%. The estimate for fiscal
2014 went up 1.9% to $4.32 over the same timeframe, reflecting an
earnings growth of 8.8%.
P&G's strong brand recognition, diversified portfolio,
rapid growth in developing nations, impressive product
development capabilities and marketing prowess encourage us.
Strategic initiatives like the June divesture of its snacks unit,
) helps P&G focus more on beauty and personal care
Although fiscal 2012 turned out to be a tough year for
P&G, the company has laid out plans to improve results in
developed markets while maintaining momentum in the developing
nations. Moreover, the company will increase focus on the most
profitable business and on its biggest innovations, and further
accelerate cost savings. These initiatives, if effectively
executed, will help push up sales and profits in the upcoming
Other Stocks to Consider
P&G is not the only bullish firm this earnings season. We
also see likely earnings beats coming from the following industry
): Earnings ESP of +1.43% and Zacks Rank #2 (Buy).
The Clorox Company
): Earnings ESP of +1.24% and Zacks Rank #3 (Hold).
COLGATE PALMOLI (CL): Free Stock Analysis
CLOROX CO (CLX): Free Stock Analysis Report
KELLOGG CO (K): Free Stock Analysis Report
PROCTER & GAMBL (PG): Free Stock Analysis
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