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Procter & Gamble (PG) Beats Q1 Earnings & Revenue Estimates

Zacks Equity Research

The Procter & Gamble Company PG, popularly known as P&G, reported first-quarter fiscal 2018 financial results, wherein earnings and revenues surpassed expectations. However, the company has been struggling to boost organic sales in a decelerating global market.

P&G’s fiscal first-quarter core earnings of $1.09 per share beat the Zacks Consensus Estimate of $1.07 by 1.9%. The bottom line increased 6% from the prior-year quarter. Currency-neutral core earnings per share (EPS) also improved 6%. The upside was driven by cost-saving initiatives taken by the company across the board.

Sales in Details

P&G’s reported net sales of $16.65 billion surpassed the Zacks Consensus Estimate of $16.64 billion. The top line grew 1% from the year-ago level. Foreign exchange had a neutral impact on sales.

Organically (excluding the impact of acquisitions, divestitures and foreign exchange), revenues grew 1% on the back of a 1% increase in organic volumes.

Of the five business segments, three registered positive organic sales growth. Beauty, Health Care and Fabric & Home Care segments registered organic sales growth of 5%, 1% and 2% respectively, in the quarter in the group. Grooming and Baby, Feminine & Family Care segments, on the other hand, posted 6% and 1% organic sales decline, respectively.

Procter & Gamble Company (The) Price, Consensus and EPS Surprise

 

Procter & Gamble Company (The) Price, Consensus and EPS Surprise | Procter & Gamble Company (The) Quote

Margins

Core gross margin decreased 40 basis points (bps) to 51.2%, as productivity cost was more than offset by headwinds such as increased commodity costs, unfavorable geographic and product mix, and product reinvestments.

Core selling, general and administrative expense (SG&A) margin decreased 10 bps (as a percentage of sales) to 28.2% driven by productivity savings from overhead, agency fee and ad production costs. Core operating margin decreased 40 bps year over year to 23%.

Total productivity cost savings were 190 bps in the quarter. P&G has been cutting costs aggressively to reduce spending across all areas like supply chain, research & development, marketing and overheads.

Financials

As of Jun 30, 2017, the company’s cash and cash equivalents were $5 billion, down from $5.57 billion at the end of fiscal 2017 (as of Jun 30, 2017). Long-term debt was $20.2 billion as of Sep 30, 2017, up from $18.04 billion at the end of fiscal 2017.

Cash flow from operating activities was $3.6 billion in the quarter, up from $3 billion a year ago.

Fiscal 2018 Guidance

The Cincinnati, OH-based company maintained its projection for the year and expects organic sales growth in the range of 2-3% for fiscal 2018. Core earnings per share growth is projected at 5-7% compared with fiscal 2017 core earnings of $3.92 per share.

Meanwhile, the company incurred over $100 million of incremental commodity cost resulting from the hurricanes that impacted the Gulf Coast in September.

On a GAAP basis, EPS is expected to decrease 26% to 28% versus fiscal 2017 GAAP EPS of $5.59, which included a significant benefit from the Beauty Brands transaction that was completed in October 2016. The fiscal 2018 GAAP EPS estimate includes approximately 10 cents per share of non-core restructuring costs.

P&G carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Peer Releases

Mondelez International, Inc. MDLZ is slated to report third-quarter numbers on Oct 30.

The Hershey Company HSY and The Kraft Heinz Company KHC are scheduled to report third-quarter results on Oct 26 and Nov 1, respectively.

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