P&G Beats Expectations with Modest Growth and Good Outlook

Plant Money

Procter & Gamble (NYSE:PG) climbed as much as 2 percent in early trading Thursday after reporting fiscal fourth-quarter and full-year results that came in ahead of analyst expectations. Net sales for the quarter increased 2 percent on the year to $20.7 billion, beating the average analyst estimate of $20.55 billion. Core earnings for the quarter decreased 4 percent on the year to 79 cents per diluted share, beating the average analyst estimate of 77 cents per share.

Fiscal fourth-quarter gross margin declined 60 basis points to 47.5 percent, while operating margin thinned 250 basis points to 12.7 percent. Core cost of goods and SG&A both increased 4 percent on the year, and while gross profit was flat, operating income was down 6 percent. Organic sales increased 4 percent.

“The Company met its objectives for the fourth quarter and fiscal year, and we will build on these results in fiscal 2014,” A.G. Lafley — P&G’s chairman, president and CEO — said in the earnings press release.

Net sales increased 1 percent to $84.17 billion and operating income increased 9 percent to $14.48 billion for the year. Diluted earnings per share increased 24 percent to $3.86 and core earnings per share increased 5 percent to $4.05. Organic sales were up 3 percent for the fiscal year. P&G also increased its quarterly dividend by 7 percent and repurchased $6 billion worth of shares.

Looking ahead, P&G is forecasting organic sales growth in a range between 3 and 4 percent for fiscal 2014, which compares against underlying global market growth of about 3.5 percent. Core earnings are expected to grow in a range between 5 and 7 percent.

P&G Revenue and Earnings Growth

Source: Data from P&G

P&G is one of the oldest companies on the block, and it has been a beacon of stability in the stock market since it was first traded on the New York Stock Exchange in 1891. The company has increased its dividend at least once per year since 1957, and investors in the company currently enjoy a healthy 3 percent yield.

P&G boasts an industry-leading operating margin of 20 percent (15.9 percent average among peers) and arguably the most recognizable portfolio of brands on the planet: it has 22 billion-dollar brands including Gillette, Tide, and Pampers.

Despite its strong position, competitors like Unilever (NYSE:UL) and Kimberly-Clark (NYSE:KMB) outperformed the company in a few metrics.

PG KMB UNL Industry
Trailing P/E 18.21 21.66 21.37 27.64
Operating Margin 20.0% 15.7% 13.6% 15.9%
ROE 17.5% 35.6% 32.3% 23.4%
Dividend Yield 3.0% 3.2% 3.3% 2.8%

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