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Procter & Gamble (PG): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:

P&G missed the Zacks Consensus Estimate for both earnings and sales in the second-quarter fiscal 2015 - for the second quarter in a row. Earnings of $1.06 per share declined 8% due to currency headwinds. Organic revenues went up 2%, as better pricing made up for softer volumes. Moreover, the company lowered full-year expectations to reflect negative currency impact on sales and profits. Despite the short term pressures, we are encouraged by P&G's strong brand recognition, diversified portfolio, aggressive cost-savings program, rapid growth in developing nations, impressive product development capabilities and marketing prowess. The company's plan to divest around 100 underperforming brands to concentrate better on fewer core strategic brands sounds encouraging. However, these structural changes and other initiatives to improve organic growth are yet to translate into top-line growth. Moreover, currency headwinds, rising commodity costs, increasing competitive pressures, challenging consumer spending environment in the U.S. and deceleration in emerging market growth rates remain the overhangs.

Overview:

Headquartered in Cincinnati, OH, The Procter & Gamble Company (PG) is a branded consumer products company which markets its products in more than 180 countries primarily through mass merchandisers, grocery stores, membership club stores, drug stores, department stores, salons, distributors, e-Commerce and high frequency stores. It has manufacturing operations in more than 40 countries. The company currently owns 23 Billion Dollar Brands. The company has five reportable segments namely Beauty, Grooming, Health Care, Fabric Care and Home Care, and Baby Care and Family Care.

Beauty, Hair and Personal Care: The segment includes hair care and styling products, antiperspirants and deodorants, cosmetics, and products for personal cleansing and skin care. Sub-segments include Beauty Care, Hair Care and Color, Prestige and Salon Professional. Billion Dollar Brands include Head & Shoulders, Olay, Pantene, SKII and Wella.

Grooming: The segment includes Shave Care products like electronic hair removal, female and male blades & razors and pre- and post-shave products. Sub-segments include Shave Care and Electronic Hair Removal. Billion Dollar Brands include Fusion, Gillette and Mach3.

Health Care: The segment includes gastrointestinal, rapid diagnostics, respiratory, vitamins/minerals/supplements and other personal health care product categories and toothbrush, toothpaste and other oral Care, product categories. Sub-segments include Oral Care and Personal Health Care. Billion Dollar Brands include Crest, Oral-B and Vicks.

Fabric Care and Home Care: The segment includes air care, batteries, dish care, fabric enhancers, laundry additives and detergents and surface care product categories. Sub-segments include Fabric Care, Home Care and Personal Power (Batteries). Billion Dollar Brands include Ariel, Dawn, Duracell, Gain and Tide. However, P&G has agreed to sell its Duracell business to Berkshire Hathaway in exchange for Berkshire's equity stake in P&G.

Baby Care, Feminine and Family Care: The segment includes baby wipes, diapers and pants, paper towels, tissues, toilet paper, adult incontinence and feminine care products. Sub-segments include Baby Care, Feminine Care and Family Care. Billion Dollar Brands include Always, Bounty, Charmin and Pampers.

In Jun 2012, Procter & Gamble sold its snack unit which included the iconic brand of potato snack, Pringles, to cereal maker, The Kellogg Company, for $2.7 billion. In Jul 2014, P&G sold off its American and Asian pet care business to privately-held American confectionary and pet food manufacturer, Mars, Inc. for $2.9 billion in cash, per a deal entered into in April. In September, it entered into an agreement to sell the European pet care business to Spectrum Brands.

The company's long-term goals include growing organic sales modestly above market growth, achieving core earnings growth in high single-digits and generating free cash flow productivity (ratio of free cash flow to net earnings) of over 90%.

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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 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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