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Buy Procter & Gamble (PG) After Q4 Earnings Report?

Christopher Vargas

Procter & Gamble PG reported its fiscal 2019 Q4 earnings before the opening bell on Tuesday. The company has been able to put together a strong first half of the year, up 31.8% YTD. Procter & Gamble also has outpaced the broader Soaps and Cosmetics market in the first half of 2019. Can the company carry its momentum on into the second half of the year? Its strong Q4 earnings report could be what catapults the company into continued growth in the second half. Let’s take a further look into Procter & Gamble’s performance this earnings season and what to expect from the company moving forward.

Overview

Procter & Gamble is headquartered in Cincinnati, Ohio and is a branded consumer products company which markets its products in more than 180 countries. PG markets its products primarily through grocery stores, mass merchandisers, drug stores, pharmacies etc. Procter & Gamble has operations in roughly 70 countries and has five reportable segments: Beauty, Grooming, Health Care, Fabric and Home Care, and Baby, Feminine and Family Care.

The beauty segment includes hair care products, antiperspirants, and products for personal cleansing and skin care. The grooming segment specializes in razors, pre/post shave products, and shaving appliances. Health Care offers gastrointestinal, supplements, rapid diagnostics and other personal health care products. Some brand names under the Health Care segment are Crest, Oral-B, and Vicks. The Fabric and Home Care sector offers products for dish care, laundry, and air care. Some brands under this segment are Dawn, Downy, and Febreze. Baby, Feminine and Family care commercializes baby wipes, diapers, paper towels, toilet paper and other like products. Brands under this branch include Bounty, Charmin, and Pampers.

Q4 Performance and Q1 Outlook

In Q4, PG generated $17.1 billion for a 4% increase and beat our revenue estimate by 1.3%. The company reported EPS of $1.10 surpassing our estimate by 3.77%. Q4 2019 marked the 17th straight earnings beat with seven sales beat out of the last eight quarters. The beauty sector brought in $3.19 billion increasing 3% from Q4 2018. Grooming fell 3% to $1.6 billion and Health Care contributed $2.04 billion jumping 13%. Fabric and Home Care increased 5% to $5.65 billion while Baby & Family Care increased 1% to $4.5 billion.

Consensus Estimates are projecting for the company’s bottom line to rally 8.04% and revenue to increase 4.12% to $17.38 billion for the next quarter. Key Company Metric estimates are forecasting the Beauty sector to jump 4% to $3.42 billion and for Grooming to pull in $1.53 billion for a 1.98% fall. Additionally, estimates are predicting Health Care to increase 15.6% to $2.13 billion while Fabric and Home Care jumps 3% to $5.65 billion. Baby and Family care is being forecasted to increase 2% to $4.48 billion.

Takeaway

Procter & Gamble has been on a roll beating our estimates over the last 17 quarters. Earnings gained from productivity efforts and strong organic growth with higher shipment volumes. PG's currently listed as a Zacks Rank #3 (Hold) with a Style Score of B in Growth. PG has an average EPS surprise of 2.94% over the last four quarters. The company seems poised to continue their growth efforts in the second half of the year. PG gave a guidance of sales growth of 3%-4% in fiscal 2020 versus the prior fiscal year. Furthermore, PG has been able to leave industry peer companies such as Church & Dwight CHD and The Clorox Company CLX in its rear view.

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