Procter & Gamble (NYSE:PG) has always been a beacon of stability in the stock market, as it’s characterized by a steady dividend and low systematic risk. Recently, though, lagging sales growth and an internal management shakeup have raised questions about the strength of the company. Can newly reappointed CEO A.G. Lafley restore investor confidence in the company? Let’s use our CHEAT SHEET investing framework to decide whether P&G is an OUTPERFORM, WAIT AND SEE, or STAY AWAY.
C = Catalysts for the Stock’s Movement
A.G. Lafley reassumed his position as CEO of P&G after Bob McDonald stepped down in May. Whether McDonald’s retirement was voluntary was never publicly addressed, but investors were beginning to lose faith in his ability to grow the company. Shareholders have high expectations for Lafley, who quadrupled company profits during his previous tenure as CEO. So far, he has reorganized the company into four different divisions and promised to continue a cost-cutting program that will save around $10 billion in expenses by 2016 and increase gross margins.
To be fair, P&G’s sluggish sales growth over the apst four years isn’t all McDonald’s fault. Stifled global demand and increased competition in the CPG industry have contributed to a more challenging business environment for P&G, whose well-known products include Tide, Pampers, and Gillette razors. P&G’s product portfolio consists of higher-end consumer goods, and many consumers have substituted the more expensive P&G products with generic brands as the economy has remained sluggish. The global economy, however, looks to be improving, which will certainly help P&G’s sales numbers in the coming quarters. P&G will announce its fiscal fourth-quarter earnings on August 1.