Will P&G (PG) Miss Earnings Estimates? - Analyst Blog


T he Procter & Gamble Company ( PG ) is set to report its first quarter fiscal 2014 results on Oct 25 before the market opens. Last quarter, it posted an earnings surprise of 2.60%. Let's see how things are shaping up for this announcement.

Factors to Consider this Quarter

P&G expects several headwinds to hurt the first half 2014 earnings growth, which are expected to dissipate in the second half. Earnings are expected to decline in the first quarter and improve only slightly in the second quarter due to several headwinds including unfavorable impact of foreign exchange, higher marketing investments and increased manufacturing startup costs. Earnings are expected to improve strongly in the second half.

In fiscal 2014, the company expects to face headwinds from a weaker underlying market growth, a much stronger dollar, higher commodity costs, and a highly competitive operating environment. However, the company expects to combat these headwinds on the back of accelerated productivity gains and cost savings, improved operating discipline, investments in promising innovation and go-to-market capabilities, and further growth in core developed/developing markets.

Earnings Whisper?

Our proven model does not conclusively show that P&G is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Negative Zacks ESP:   The Earnings ESP is -1.91%. That is because the Most Accurate estimate stands at $1.03 while the Zacks Consensus Estimate is higher at $1.05. That is a difference of -1.91%.

Zacks Rank #3 (Hold): P&G carries a Zacks Rank #3 (Hold), which lowers the predictive power of ESP because a Zacks Rank #3 (Hold) when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

PROCTER & GAMBL (PG): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: PG



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