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3 Ways Procter & Gamble Co. Is Beating the Competition

A woman shopping for baby products

Procter & Gamble (NYSE: PG) is on stronger footing these days. Its fourth-quarter expansion pace recently edged past Kimberly-Clark 's(NYSE: KMB) for the first time in over two years. Sales volumes were nearly as high as Unilever 's(NYSE: UL) , too.

Yet P&G is still on track to lose a slice of market share this year even as it closes that critical gap with rivals. Still, there are some important areas that P&G comes out well ahead of its peers.

A woman shopping for baby products

Image source: Getty Images.

Profitability

The company is one of the most profitable in its peer group, for one. Gross profit margin improved by nearly a full percentage point last quarter as its efficiency gains far outweighed the impact of higher commodity costs.

Currency exchange rates significantly understate that profitability gain. Strip out the currency shifts and the company's gross margin actually rose by 1.2 percentage points, thanks to over 2 percentage points of gains from its $10 billion cost-cutting program .

PG Operating Margin (TTM) data by YCharts .

Operating margin improved to 22% last quarter, putting it well ahead of Unilever's 15% and Kimberly-Clark's 18%. In fact, only Colgate (NYSE: CL) has P&G beat in this core metric.

Marketing

Few companies in the world can claim anything approaching Procter & Gamble's marketing strength. It invests nearly $5 billion in advertising each year, making it the single biggest spender on the market.

PG Stock Buybacks (TTM) Chart

PG Stock Buybacks (TTM) data by YCharts .

P&G isn't planning another multibillion dollar brand sale on par with 2015's Duracell exchange or last year's beauty product divestment. Yet the company still plans to send about $18 billion back to shareholders, mainly through stock repurchases, over each of the next two fiscal years.

Management's hope is that by that time P&G will be growing at a fast-enough pace, and with strong-enough profitability, to push overall shareholder returns back to market-thumping levels. The company isn't enjoying balanced sales and earnings gains yet, but it is at least moving in that direction. Its core earnings are set to grow for the first time in three years in 2017 as sales gains finally accelerate after a brutal stretch of declining or flat organic revenue.

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Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends Kimberly-Clark and Unilever. The Motley Fool has a disclosure policy .

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


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

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