Back to the Future for P&G's CEO
When investing in stocks, I like to find those with catalysts.
Potential catalysts capable of stoking investors' interest include
new products, a major restructuring of operations,
under-appreciated assets (such as an equity stake in a fast-growing
company), the presence of an activist investor, or a management
Activist investor Bill Ackman has been prodding Procter & Gamble ( PG ) for change; that helped fuel a management change at the consumer-products giant.
The firm announced Alan Lafley would be the new president and CEO, replacing Bob McDonald. Lafley's name may be familiar to long-time P&G shareholders -- he was the president and CEO of P&G from 2000 to 2009.
This "back-to-the-future" executive switch does give P&G shares another catalyst, although the stock's action since the change in late May has been rather subdued.
It could be that Lafley is just keeping the seat warm for a new successor, which means Wall Street is playing a wait-and-see game with the shares until there is greater clarity on who will be leading the company long term.
Procter & Gamble does have its work cut out for it in the near term. The company's stable of brand names continues to see plenty of competition from lower-priced generics and store brands.
Per-share profits are expected to rise only modestly in fiscal 2013 ending in June to $4.04, up from $3.85 in fiscal 2012.
However, Wall Street is hoping for better growth in 2014, with the consensus earnings estimate currently at $4.32. To meet or exceed that estimate, P&G will need some help from its vast overseas business, which accounts for roughly two-thirds of total sales.
While near-term operating results aren't likely to ignite much fervor with investors, the stock's yield of more than 3% should provide downside protection for the stock. P&G recently boosted the quarterly payout 7% to $0.602 per share.
I have owned Procter & Gamble stock for many years. While the stock rarely tops the leader board, it usually provides decent returns during up market years and has traditionally provided nice ballast to a portfolio during more stormy market periods. I suspect that will remain the company's modus operandi going forward.
I would feel comfortable nibbling on the stock at current levels and would buy more aggressively on price breaks below $70.
Editor's Note: This article was written by Chuck Carlson of DRIP Investor for MoneyShow .
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