May 5, 2024

P&G Shares Fall After Forecast Misses Expectations

The world’s largest household products maker also posted fiscal third-quarter profit that topped estimates despite sales that were weaker than both the company and analysts had anticipated.

PG has been trying to reinvigorate itself under Chief Executive Bob McDonald. The company has held or gained market share in more of its businesses in the latest quarters after stiffer competition from rivals like Unilever and Colgate-Palmolive Co.

While products such as Tide Pods have boosted U.S. sales, PG still needs to figure out the formula for getting products such as Pantene shampoo to stand out among competitors, it said. PG plans to promote several brands during the current quarter, including Olay skin care products.

Net sales decreased in the hair care and skin care business in the latest quarter.

“We’ve got a little bit more work to do” in skin care, McDonald told reporters.

In February 2012, McDonald unveiled a $10 billion restructuring plan including thousands of job cuts after PG acknowledged it was not nimble enough, especially in emerging markets.

Shares of PG fell to $79.65 in premarket trading after closing at an all-time high of $82.54 on Tuesday.

“We continue to believe the necessary improvements at PG from both a cost and innovation standpoint will take time, and the stock seems to already reflect further momentum,” said Oppenheimer analyst Joseph Altobelllo, who rates the stock “market perform.”

SALES MISS FORECAST

PG, whose other brands include Pampers diapers and Gillette razors, forecast fourth-quarter core earnings of 69 cents to 77 cents per share, while analysts were looking for 81 cents, according to Thomson Reuters I/B/E/S. PG earned 82 cents per share in the fourth quarter of fiscal 2012.

PG said it earned 99 cents per share on a core basis in the quarter ended in March, topping analysts’ target of 96 cents. Core earnings exclude items such as restructuring charges.

Overall sales rose 2 percent to $20.598 billion while analysts were looking for sales of $20.73 billion. The company had forecast 3 percent to 4 percent in sales growth.

PG’s organic sales, which strip out the impact of divestitures and foreign exchange changes, grew 3 percent – at the low end of its forecast of 3 percent to 4 percent.

The company saw the strongest volume growth in health care at 5 percent, helped by new toothpastes and a stronger cold and flu season.

On a net basis, the company earned $2.57 billion, or 88 cents per share, in the fiscal third quarter ended in March, up from $2.41 billion, or 82 cents per share, a year earlier.

The company had forecast core earnings per share of 90 cents to 96 cents and net earnings of 80 cents to 88 cents.

Last April, Wall Street analysts roasted McDonald on a conference call after PG issued a profit warning and decided to rescind some price increases. The dour performance prompted activist investor Bill Ackman to call for changes last summer when he bought the shares.

Ackman’s Pershing Square had a 1.02 percent stake in PG, or 27.95 million shares, as of December, making it the company’s eighth-largest shareholder, according to Thomson Reuters data.

PG said it now plans to repurchase $6 billion of its stock this year, at the high end of its prior forecast for $5 billion to $6 billion in buybacks. Last June, PG decided to hold off on buybacks, but in August quickly reverted back to its usual plan. The stock is currently trading near all-time highs.

(Reporting by Jessica Wohl; in Chicago; Editing by Jeffrey Benkoe)

Article source: http://www.nytimes.com/reuters/2013/04/24/business/24reuters-procter-results.html?partner=rss&emc=rss