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Here's Why Procter & Gamble's a Promising Investment Option

Zacks Equity Research

The Procter & Gamble Company PG, popularly known as P&G, appears to be a solid bet, given its sturdy efforts to remain on growth trajectory. We expect the company to continue gaining from ongoing initiatives to improve productivity. The company is on track to improve product portfolio through strategic initiatives. Also, it is progressing well with its cost-saving plans.

All these factors helped the company to deliver robust second-quarter fiscal 2020 results. The company’s bottom line beat the Zacks Consensus Estimate, maintaining the positive surprise trend of more than a couple of years. Results primarily gained from productivity efforts, robust shipment volume, favorable mix and pricing. Backed by strong organic sales growth, core earnings and returns to shareholders in the fiscal second quarter, the company also raised its view for fiscal 2020.

The company now projects all-in and organic sales growth of 4-5% compared with 3-5% mentioned earlier. The guidance includes a modest impact of adverse foreign currency, which is likely to be offset by slight gain from acquisitions and divestitures. Moreover, it now projects core EPS growth of 8-11% for fiscal 2020 compared with 5-10% mentioned earlier.

In the past six months, shares of this Cincinnati, OH-based company have increased 8.8%, outperforming the industry’s growth of 6.1%.


 

Further, analysts are steadily growing bullish on the Zacks Rank #2 (Buy) stock. The Zacks Consensus Estimate for fiscal 2020 and 2021 has moved north by 5 cents each to $4.99 and $5.29, respectively, in the past 30 days.

Factors Narrating Procter & Gamble’s Growth Story

P&G is focused on productivity and cost-saving plans to boost margins. The company’s continued investment in business, alongside efforts to offset macro cost headwinds and balance top-line and bottom-line growth, underscore its productivity efforts.

With cost savings and efficiency improvements across all facets of business, it has crossed the mid-point of its second five-year (fiscal 2017-2021) cost-saving target of $10 billion. The second five-year restructuring plan targets cutting costs in areas including supply chain and cost of goods sold (COGS), marketing, digitization and promotional spend effectiveness.

Also, the company focuses on improving its product portfolio through initiatives, which enable it to concentrate on its fast-growing businesses. For this, it relies on the strategy of acquiring complementary businesses. In a bid to boost its women’s care portfolio, it recently agreed to acquire a growing female body care company – Billie Inc.

The transaction is likely to be complementary to P&G’s existing female grooming portfolio, which includes the Venus, Braun and Joy brands. The company expects to benefit by combining its strong digital and direct-to-consumer marketing capabilities and growing range of personal care products with the fresh, digitally-native brand, which appeals to Millennial and Gen Z consumers.

Further, P&G expects Billie’s high-quality, naturals-focused razors and body care products to make its portfolio more dynamic. Some of its other acquisitions include the beauty brand – First Aid Beauty, producer of period products with natural ingredients – This is L., the consumer health business of Germany-based Merck KGaA and Walker & Company Brands. These acquisitions should bolster the company’s product portfolio in various categories. Also, P&G follows a systematic divestiture plan to streamline its portfolio. It has divested several assets over the years as part of portfolio reshaping plan.

We anticipate all aforementioned factors and its robust outlook to help the company remain in investors’ good books.

3 Other Stocks to Consider

Helen of Troy Limited HELE presently has an expected long-term earnings growth rate of 8.6% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Coca-Cola Company KO has a long-term earnings growth rate of 7.2% and carries a Zacks Rank #2.

Constellation Brands, Inc. STZ has a long-term earnings growth rate of 8.2%. Currently, it carries a Zacks Rank #2.

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