At the company's annual meeting held recently, the Chairman,
President and Chief Executive Officer of consumer products giant
Procter & Gamble
) - Bob McDonald - declared that the company is operating according
to its growth and productivity plan in order to achieve its
In the long term, the company aims to increase its organic sales by
1-2% ahead of the market, achieve core earnings growth in high
single to low double digits and generate free cash flow
productivity (ratio of free cash flow to net earnings) of over 90%.
Procter & Gamble is known for its ability to understand
consumer needs and innovate accordingly to create whole new brands
and categories. The CEO confirmed that the company continues to
focus on innovation and has launched several new products under the
brands, Olay Regenerist, Pantene, Head & Shoulders and others.
The company also stated that it intends to deploy its resources
toward the development of its top 40 categories, 20 top innovations
and 10 developing markets. Of the top 40 performing categories,
which generate highest annual revenue and earnings, the company has
20 in Household Care and 20 in Beauty & Grooming.
The 20 top innovations have stronger growth potential than the rest
of the product portfolio. The company believes that consistent new
product innovations, supported by strong marketing and efficient
distribution channel, will deliver strong results over the long
The company also intends to continue its growth momentum in the top
10 developing markets, in order to drive profit in the short and
long term. The company plans to increase sales in these
markets by focusing on affordability, accessibility and brand
One of the company's long-term strategies includes a five year cost
savings initiative of $10 billion announced in February 2012. The
company intends to reduce its overhead spending and marketing costs
and generate savings through efficiency. The plan aims to reduce
spending across all areas including a workforce reduction of 5,700
by the end of fiscal 2013.
We appreciate the company's strategy of product innovation and its
strong market share. However, we are concerned about the company's
performance in the near future, owing to high commodity costs and
sluggish growth in the developed nations due to weak economic
We currently have a 'Neutral' recommendation on Procter &
Gamble. The stock carries a Zacks #2 Rank that translates into a
short-term 'Buy' rating. On the other hand, we have a 'Neutral'
), one of P&G's peers. The stock carries a Zacks #2 Rank that
translates into a short-term 'Buy' rating.
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