NEW YORK (AP) -- A week after consumer products maker Procter & Gamble cuts its financial forecast for the second time in three months, an analyst downgraded his rating on the stock on worries its results will still fall short of expectations.
Procter & Gamble, the world's largest consumer product company which makes everything from Tide detergent to Gillette razors, has been hurting from weakness in Europe and a softening in China. It is also facing steep costs for commodities such as fuel and packaging, and its own executional problems including missteps in pricing in some categories.
Part of the problem is P&G's "premium" status. It doesn't sell the cheapest toothpaste or soap, but focuses on "name-brand" versions. However, when the economy weakens, consumers often trade down to cheaper products.
P&G has come up with a plan to improve results, including cost-cutting, revamping its international expansion strategy to focus on the most profitable areas and rolling back price increases in some cases. But analysts fear it isn't doing enough. They note that P&G's competitors such as Unilever and Colgate-Palmolive have had better results than P&G.
On Wednesday, RBC Capital Markets analyst Jason Gere cut his rating on P&G's stock to "Sector Perform" from "Outperform." Gere said after a week of digesting Cincinnati-based P&G's outlook cut and speaking to executives at the company, he is downgrading his rating.
"At the heart of the matter, management will need to execute with near perfection as it undertakes a bigger focus on its largest and most profitable businesses while cutting meaningful costs across the company," he wrote. He's not sure they'll be able to pull that off, he added.
The company's price cuts could offset the benefit of its cost-cutting plan if taken too far, he said.
P&G did not immediately respond to a request for comment.
Shares of P&G, which have fallen 5 percent since the guidance cut last week, rose 54 cents to $59.81 in midday trading. The stock is down 11 percent since the beginning of the year.
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