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Will Procter & Gamble (PG) Retain Earnings Beat Trend in Q2?

Zacks Equity Research

The Procter & Gamble Company PG is set to report second-quarter fiscal 2019 results on Jan 23, before the opening bell.

The company boasts a robust earnings surprise history, having outpaced estimates for 14 straight quarters now. A glimpse of its earnings performance in the trailing four quarters shows that it has delivered an average positive surprise of 3.2%.

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

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

The Zacks Consensus Estimate for the quarter under review is pegged at $1.21, which depicts an improvement of 1.7% year over year. Estimates remained unchanged over the last 30 days. For total sales, the consensus mark stands at $17.2 billion, mirroring roughly 1% decline from the year-ago quarter.

How Things are Shaping Up for This Announcement

Procter & Gamble has been gaining from its growth initiatives, including product improvement through innovation, packaging and marketing efforts. Management also remains focused on productivity and cost-saving plans to cushion margins. Notably, the company is expected to benefit from its skin, personal care and health care categories.

Meanwhile, the company focuses on improving its product portfolio through buyouts. Recently, Procter & Gamble has acquired a startup company — Walker & Company Brands — which provides health and beauty solutions. Management also bought First Aid Beauty, which reinforce the company’s position in the beauty space. These apart, Procter & Gamble will gain from its strong brand recognition.

The consensus mark for sales at the Health Care segment is pinned at $2,104 million, portraying nearly 14% growth year over year.

While the aforementioned factors raise optimism on the upcoming quarterly results, we remain wary of Procter & Gamble’s strained margins. In fact, higher commodity and shipment costs as well as increased cost of investments have been hurting margins. Adverse currency fluctuation is an additional headwind. In fact, currency headwinds marred results in the first quarter and remain concerns in the second quarter as well.

Procter & Gamble continues to grapple with soft performance in its Baby Care business. While the company is focused on strengthening its position through the diaper pant products, particularly Pampers in Baby Care, headwinds related to other product categories might weigh on results in the to-be-reported quarter. Management also stated that the Grooming segment is likely to face challenges from value share competition both offline and online, though it performed impressively in first-quarter fiscal 2019.

What the Zacks Model Unveils

Our proven model does not conclusively show that Procter & Gamble is likely to beat earnings estimates in the fiscal second quarter. This is because a stock needs to have both — 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 has a Zacks Rank #3 but its Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

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

Archer Daniels Midland Company ADM has an Earnings ESP of +2.45% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tupperware Brands Corporation TUP has an Earnings ESP of +0.37% and a Zacks Rank of 2.

Colgate-Palmolive Company CL has an Earnings ESP of +1.02% and a Zacks Rank #3.

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