Procter & Gamble Earnings Preview: Inflationary Pressures May Hurt Sales   |


  • Reports Q1 2022 outcomes on Tuesday, Oct. 19, earlier than the market opens
  • Revenue Expectation: $19.79 billion
  • EPS Expectation: $1.59

Shares of world shopper staples large Procter & Gamble (NYSE:) have had an amazing run throughout the pandemic.

Investors despatched the inventory hovering to a file excessive amid explosive development in gross sales. But that uncommon interval of growth is winding down as the worldwide financial system reopens and shoppers shift their spending patterns.

In addition, the Cincinnati, Ohio-based P&G can also be dealing with quite a lot of headwinds, together with supply-chain disruptions and escalating prices. These components may sluggish gross sales and damage margins this 12 months and the following.

The third-quarter version of Deloitte’s CFO Signals report, which collected responses within the first half of August, said that 44% of CFOs indicated provide disruptions have elevated prices by 5% or extra this 12 months, whereas 32% mentioned gross sales have fallen because of delays or shortages, in keeping with Bloomberg.

In its newest replace, P&G is forecasting natural gross sales development of 2-4% within the firm’s present fiscal 12 months, which started in July. That’s down from the 6% advance P&G posted for the —a interval marked by pantry loading as shoppers holed up of their properties throughout the begin of the COVID-19 disaster.

P&G has been among the many few firms which have maintained their full-year earnings steerage all through the pandemic, benefiting from the panic-buying of bathroom paper and cleansing merchandise, because the extremely contagious COVID-19 virus unfold. That efficiency, nonetheless, might be robust to repeat.

Stock Is Still Attractive

The slowing tempo of development might be accompanied by $1.9 billion in increased bills, after taxes, from freight and supplies like pulp and resins. This, coupled with forex variation, is anticipated to cut back earnings per share by about $0.70 throughout the 12 months, in keeping with P&G.

These transitory components, nonetheless, shouldn’t discourage long-term buyers from making the most of any potential weak point in P&G shares. The firm is well-positioned to cope with commodity inflation because of its sturdy and diversified product portfolio.

During the previous 5 years, P&G—whose different manufacturers embody an array of family names similar to Dawn dishwashing cleaning soap, Bounty paper towels and Crest toothpaste—has innovated in advertising and marketing and simplified its organizational construction.

Under Chief Executive Officer David Taylor, who subsequent month might be changed by Jon Moeller, P&G has lower its roster of manufacturers from 175 to 65, specializing in the 10 product classes the place margins are highest. During the course of that course of, the corporate has additionally eradicated 34,000 jobs by means of a mixture of name gross sales and buyouts, in addition to plant closures—slashing greater than $10 billion in prices.

Bottom Line

P&G inventory, which closed at $144.42 on Friday, stays our favourite choose from among the many packaged shopper items firms. It’s one of many largest dividend payers within the US—distributing $3.48 per share annual dividend for a yield of two.4%—and with 65 years of dividend will increase, it has a payout track-record that is arduous to match.

We see little motive to desert this shopper powerhouse, even when its inventory goes by means of a tough patch within the present inflationary setting.

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