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Can Procter & Gamble (PG) Beat on Earnings Again in Q1?

Zacks Equity Research

The Procter & Gamble Company PG is set to report first-quarter fiscal 2020 results on Oct 22, before the opening bell.

The company boasts a robust earnings surprise history, having outpaced estimates for 17 straight quarters now. It delivered average positive earnings surprise of 2.9% in the trailing four quarters. Moreover, the company reported sales beat in seven of the last eight quarters.

Procter & Gamble Company (The) Price and EPS Surprise


Procter & Gamble Company (The) Price and EPS Surprise

Procter & Gamble Company (The) price-eps-surprise | Procter & Gamble Company (The) Quote

The Zacks Consensus Estimate for its earnings in the quarter under review is pegged at $1.24, which suggests an improvement of 10.7% from the year-ago reported figure. Estimates for the quarter remained unchanged in the last 30 days. For total sales, the consensus mark stands at $17.5 billion, indicating a 4.8% increase from the year-ago quarter’s reported number.

How Things Are Shaping Up for This Announcement

Procter & Gamble has been gaining from growth initiatives, including product improvement through innovation, packaging and marketing efforts. Management also remains focused on productivity and cost-saving plans, which should cushion margins. Its continued investment in business alongside efforts to offset macro cost headwinds, and balanced top and bottom-line growth underscore productivity efforts. These have not only aided results in the past quarters but also boosted stock performance. We expect the company’s first-quarter fiscal 2020 results to reflect continued gains from these actions.

Shares of the company have gained 1.1% in the past month, outperforming the industry’s growth of 0.3%. This indicates a positive sentiment on the stock ahead of earnings. Additionally, the stock has witnessed growth of 51.1% in the past year.


Meanwhile, the company focuses on improving the product portfolio by acquiring complementary businesses. It also follows a systematic divestiture plan to streamline the portfolio. Some of the company’s recent acquisitions — including This is L., First Aid Beauty, the consumer health business of Merck KGaA, and Walker & Company Brands — have bolstered its product portfolio. These acquisitions and divestitures are likely to aid top-line growth in the quarters ahead through a better focus on core businesses.

The company’s various efforts have been aiding organic sales growth. This organic growth is visible in the rise in shipment volume as well as favorable mix and pricing. Notably, all of the company’s business segments contributed to organic sales growth in the last reported quarter.

Driven by robust organic sales performance, management provided upbeat guidance for fiscal 2020. It projects both all-in and organic sales growth of 3-4% in fiscal 2020. Moreover, the company projects core EPS growth of 4-9% for fiscal 2020, whereas it earned $4.52 per share in fiscal 2019.

While the aforementioned factors raise optimism about the upcoming quarterly results, we remain wary of the adverse currency fluctuations. Currency fluctuations hurt net sales to the tune of about 4% and core operating margin by 80 bps in fourth-quarter fiscal 2019. This is also likely to mar results in quarters ahead.

What the Zacks Model Unveils

Our proven model conclusively predicts that Procter & Gamble is likely to beat earnings estimates in the fiscal first quarter. This is because a stock needs to have — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Procter & Gamble currently carries a Zacks Rank #2 and has an Earnings ESP of +0.60%. The combination of the company’s favorable Zacks Rank and positive Earnings ESP makes earnings beat likely.

Other Stocks Poised to Beat Earnings Estimates

Here are some other companies that you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:

e.l.f. Beauty Inc ELF has an Earnings ESP of +9.76% and sports a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Estee Lauder Companies Inc EL currently has an Earnings ESP of +0.50% and a Zacks Rank #2.

Church & Dwight Co., Inc CHD presently has an Earnings ESP of +1.64% and a Zacks Rank of 2.

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