P&G Beats Q4 Earnings View, Issues Strong FY 2021 Outlook

P&G Beats Q4 Earnings View, Issues Strong FY 2021 Outlook
July 31, 2020

 

Procter & Gamble Co (NYSE: PG) reported a swing to profit in the fourth quarter and comfortably exceeded Wall Street analyst’s estimates. The company also issued a robust FY 2020 outlook on the expectation of an increase in demand for its products. Following strong results and upbeat FY 2021 outlook, the stock hit a new all-time high of $132.03, before closing at $131.42, up $3.11 or 2.42% from the prior close.

The Cincinnati, Ohio based company posted fourth-quarter sales of $17.698 billion, up 4% from $17.094 billion in the comparable quarter last year. Analysts had anticipated revenues of $16.94 billion in 4Q 2020. The negative impact of the currency exchange rate affected sales by 3% during the quarter. Barring the effect of the currency exchange rate, acquisitions, and divestments, organic sales increased 6%, led mainly by a 3% increase in shipment volume.

Consumers who were forced to stay at home due to lockdown restrictions purchased a greater quantity of Tide laundry detergent and Mr. Clean items. In general, strong demand for personal health, household cleaning, and cleansing products led to an increase in volume. North America and Chinese markets contributed to the growth. The company executives anticipate the demand to increase in the coming months.

The company swung to a profit of $2.80 billion, or $1.07 per share in the fourth quarter, from a net loss of $5.24 billion, or $2.12 a share in the prior-year period. Last year’s loss was mainly due to a one-time impairment charge related to Gillette Shave Care business.

Excluding charges, core earnings were $3.026 billion, or $1.16 per share, compared with $2.901 billion, or $1.10 a share, led by an increase in sales and operating margin. Analysts surveyed by Thomson Reuters had anticipated earnings of $1.01 per share for the June quarter.

Commenting on the results, David Taylor, Chairman, President and CEO said: We delivered strong, balanced sales and profit results in fiscal 2020, both pre-COVID and through the balance of the year, meeting or exceeding each of our going-in targets, demonstrating the commitment and agility of P&G people and the robustness of our strategy.”

Segment-wise,

  • Beauty products, which include Olay and Pantene, generated revenues of $3.176 billion, almost flat from last year. Travel prohibitions enforced due to pandemic resulted in a double-digit revenue loss in pricey SK-II skincare products.
  • Grooming products, which include Gillette and Venus, recorded revenues of $1.510, down 5% on a y-o-y basis. The shaving business, in particular, recorded a mid-single-digit drop in sales. China was an exception with double-digit growth in grooming product sales.
  • Health Care products, which include Crest and Oral-B, posted sales of $2.015 billion, reflecting a decrease of 1% from 4Q 2019. Notably, Vicks and Pepto-Bismol recorded double-digit growth.
  • Fabric & Home Care products, which include Tide and Comet cleaning products, saw an 11% increase in revenues to $6.290 billion.
  • Baby, Feminine & Family Care products, which include Pampers diapers, Bounty paper towels, and Charmin toilet paper, generated sales of $4.618 billion in June quarter, an increase of 3% on a y-o-y basis.

P&G anticipates an increase in demand for its products in FY 2021, despite relaxation in lockdown prohibitions.

Moving forward, the company anticipates FY 2021 sales growth of between 1% and 3% and organic growth of 2% to 4%. P&G also expects earnings per share growth of 6% and 10%. In FY20, the company recorded earnings of $4.96 per share. Core earnings per share are anticipated to increase from 3% to 7% from FY 2020 core earnings of $5.12 per share. The company anticipates repurchasing shares worth $6 billion to $8 billion and paying $8 billion in dividends in FY 2021.

The quarterly earnings beat and impressive FY 2021 outlook are expected to keep the stock of P&G bullish in the short-term.

Technically, the stock has bounced off the support at 115. The stock is now trading in the uncharted zone. Additionally, the Chaikin money flow indicator also has a positive reading. Therefore, we are anticipating the stock of P&G to remain bullish in the short-term.

pg - technical analysis - 31st July 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Janine

Janine

Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be


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