P&G Beats 4Q15 Earnings Estimates, Missed on Sales
Earnings Analysis: Procter & Gamble’s Performance in Fiscal 2015
Procter & Gamble’s 4Q15 financial results
Procter & Gamble (PG), or P&G, released its 4Q15 and fiscal 2015 earnings on July 30. The quarter ended on June 30, 2015. The company’s adjusted EPS (earnings per share) grew 8% compared to the prior year and 22% on a constant-currency basis to $1 in 4Q15. Its revenue fell 9% to ~$17.8 billion. Adverse currency movements reduced the top line by 9%. Organic sales were flat for the quarter.
In 4Q15, P&G came in ahead of consensus Wall Street analyst estimates on earnings after missing for the past three quarters. Consensus estimates had projected an adjusted EPS of $0.95.
Reasons for the rise in EPS
P&G’s 4Q15 EPS was lifted partially due to a $0.09 per share benefit from non-operating income, primarily from minor brand divestiture gains. EPS also benefited from an operating margin improvement of 90 bps (basis points) to 18.10%—driven by productivity savings. Similarly, the EPS for peers Kimberly-Clark (KMB) and Clorox (CLX) also rose as they declared their quarterly results. In 2Q15, the adjusted EPS for Kimberly-Clark rose 6% to $1.41—compared to the adjusted EPS from continuing operations of $1.33. In 4Q15, the diluted EPS for Clorox rose 11% to $1.44.
Stronger dollar impact
A stronger US dollar continues to impact P&G’s revenue and earnings. The company derives ~65% of its revenue from outside the US. In comparison, Colgate-Palmolive (CL) derives ~77% of its revenue from outside the US.
However, P&G’s large positions in Russia, Ukraine, Japan, and Venezuela have led to a higher impact from the appreciating dollar. These markets were affected the most by forex headwinds. In Russia, the devaluation of the ruble heavily impacted sales. Its sales fell 57% in June.
P&G, along with its peers Kimberly-Clark and Clorox, has exposure to the Consumer Staples Select Sector SPDR ETF (XLP) and the SPDR S&P 500 ETF (SPY). They account for 15.2o% and 1.4o%, respectively, of the portfolio weight.
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