Despite weaker sales than both the company and analysts had anticipated, Procter & Gamble (NYSE:PG) on Wednesday reported fiscal third-quarter profit that topped estimates. However, shares are trading lower this morning after the company forecast current-quarter profit below Wall Street’s expectations and year-ago levels.
P&G reported net income rose 6 percent in the third quarter, as the company cut costs and gained market share in North America. However, the company is facing a weakened European economy and a slowdown in China, and revenue fell short of analyst expectations.
“Strong cost savings enabled us to exceed our outlook on the bottom line,” CEO Bob McDonald said.
McDonald is aiming to save $10 billion by 2016, in a plan he announced in February 2012. After expanding too quickly in some emerging markets, the company is now focusing on its 20 biggest new products and its 10 most profitable emerging markets to try to gain market share.
And despite disappointing earnings results, the plan seems to be working — P&G has managed to hold or gain market share in categories representing more than 50 percent of its global sales and two-thirds of its U.S. sales amidst heightened competition from other household products suppliers like Colgate-Palmolive (NYSE:CL).
But while some products continue to thrive — particularly the company’s Tide laundry detergent brand, which saw boosted sales in the latest quarter with Tide Pods — others still need a push; namely, the company’s hair care and skin care business, which reported a decrease in net sales for the third quarter. P&G said it plans to promote several brands during the current quarter, including Olay skin care products.
P&G reported earnings of 99 cents per share on a core basis in the third quarter, topping analyst targets of 96 cents. Core earnings exclude items such as restructuring charges.
Sales were up 2 percent to $20.598 billion, but analysts were looking for sales of $20.73 billion, and the company had earlier forecast a sales bump of 3-4 percent. Organic sales, which don’t factor in the impact of divestitures and foreign changes, grew 3 percent.
On a net basis, the company earned $2.57 billion, or 88 cents per share, in the quarter ended in March, up from $2.41 billion, or 82 cents per share, in the year-earlier period.
P&G had forecast core earnings of 90-96 cents per share and net earnings of 80-88 cents per share.
P&G forecast fourth-quarter core earnings of 69-77 cents per share, while analysts were looking for 81 cents, according to Thomson Reuters I/B/E/S. P&G earned 82 cents per share in the fourth quarter of fiscal 2012.
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