Overview: Pershing Square's new positions and disposals in 1Q14 (Part 7 of 7)
Bill Ackman’s Pershing Square took new stakes in Platform Specialty Products (PAH), Apartment Investment & Management Company (AIV), Allergan Inc. (AGN), and Home Properties Inc. (HME). Positions sold include General Growth Properties (GGP) and Procter & Gamble Co (PG).
Last quarter, Market Realist reported that Bill Ackman’s Pershing Square has sold off most of its stake in Procter & Gamble (PG). The fund completely exited the position that accounted for 0.73% of the fund’s portfolio in 1Q14.
Procter & Gamble is a global leader in retail goods focused on providing branded consumer packaged goods. Its customers include mass merchandisers, grocery stores, membership club stores, drug stores, high-frequency stores, distributors, and e-commerce retailers. Sales to Wal-Mart Stores Inc. and its affiliates represent approximately 14% of PG’s total revenue in 2013. The company has five reportable segments under U.S. generally accepted accounting principles (or GAAP): Beauty; Grooming; Health Care; Fabric Care and Home Care; and Baby Care and Family Care.
For 3Q14, Procter & Gamble exceeded earnings estimates, but missed on revenue. The management noted that, “We’re operating in a slow-growth, highly competitive environment, which places even greater importance on strong innovation and productivity improvement.” The company saw an impact from major currency devaluations in Venezuela, Russia, Ukraine, Japan, and Turkey. Net sales were flat at $20.6 billion for the third quarter on a 3% increase in unit volume versus the same period the previous year. Fabric Care and Home Care segment organic sales increased 6% with growth across each business. Health Care and Grooming volume grew low single digits. Baby, Feminine, and Family Care and Beauty volume was unchanged. Core earnings per share were up 5% year-over-year (or YoY) to $1.04 and 17% on a currency-neutral basis. Diluted net earnings per share were $0.90—an increase of 2% versus the prior year.
P&G also said it was selling a significant portion of its pet food business to Mars Inc. for $2.9 billion.
The company announced in 2012 that it is undergoing a restructuring that involves job cuts and acceleration of cost savings. In 3Q14, gross margin decreased 140 basis points due to 150 basis points of geographic and product mix, 100 basis points from foreign exchange, and higher commodity costs. SG&A as a percentage of sales decreased 170 basis points driven by 130 basis points from a combination of marketing efficiencies and overhead productivity savings.
The company expects organic sales growth of 3–4%. All-in sales growth is expected to be approximately 1%, including a negative foreign exchange impact of 2–3%.
Browse this series on Market Realist:
- Part 1 - Must-know: Bill Ackman’s Pershing Square 1Q14 positions
- Part 2 - Why Pershing initiates position in Platform Specialty Products
- Part 3 - Why Pershing opened new position in AIMCO
- Consumer Discretionary
- Procter & Gamble
- Bill Ackman
- Allergan Inc.