P&G makes highly in-demand products including cold and flu products from Vicks, Sinex and NyQuil; Tide laundry detergent; Bounty paper towels; Charmin toilet paper; Puffs tissues; Pampers baby products; PeptoBismol; Cascade dishwasher detergent; Dawn dish soap; Microban sanitizer; and Mr. Clean cleaning products. On the 3Q earnings call, management said that people are washing their clothes more often, eating more meals at home, and washing more dishes. Analysts immediately reacted to the news and purchases of the stock on a large scale make investor think that P&G could be one of the best stocks to invest right now. They are also more focused on cleaning often-used surfaces, like kitchen counters, and using more P&G products including Bounty paper towels, Swiffer dusting cloths, and Mr. Clean products. However, the Gillette division could face pressure if people shave less often or trade down to lower-priced razors. To be clear, the company is not immune to disruption from COVID-19.
RECENT DEVELOPMENTS
On September 10, Vice Chairman, COO and CFO Jon Moeller spoke at a broker-sponsored consumer conference. We reviewed a transcript of his presentation. Mr. Moeller said, that in the long term P&G remains well positioned to serve customers heightened needs and changing behaviors and create value in an attractive industry. The company continues to focus its investments on products which perform better than competing brands. He said that the relevance of the company’s products has the potential to increase. On a more positive note, he said that P&G has seen good momentum through the first two months of the new fiscal year. He added that organic sales in the U.S. were up 12% in August. The company’s annual report suggests that the COVID-19 crisis has opened up opportunities for the company to be more productive.
EARNINGS & GROWTH ANALYSIS
The company projected FY21 total sales growth of 1%-3% and organic sales growth of 2%-4%. P&G expects core EPS growth of 3%-7% .12. That’s a range of $5.27-$5.48. The prerelease consensus was $5.23 and our estimate was $5.27. An effective tax rate of 18%-19%. 90%. There is obviously a lot of uncertainty embedded in our estimates, although we’re pretty confident in the relevance of the company’s products over the next year. The good news is that P&G makes products that are in demand and that big sellers like Walmart, Costco, Target and Kroger are open for business. While there could be disruptions, we think people will pay more attention to personal and household cleanliness. $5.75, which represents a 2% sales increase and continued share repurchases of 8%. The company’s long-term objective is to grow organic sales faster than the markets it serve, and grow core EPS. P&G uses a number of non-GAAP financial measures.
FINANCIAL STRENGTH & DIVIDEND
Procter & Gamble is working with entrepreneurs through its P&G Ventures business to create new brands, technologies and business models. P&G is using data analysis to create hundreds of specific, targeted, audiences, like first-time moms, and first-time washing machine owners, from a generic 18-49 age group. P&G has exposure to rising commodity costs, which, when combined with lower shelf prices, can cut into margins. P&G’s global presence is likely to add diversification to the company’s cash flows economic weakness or currency turmoil could hurt earnings in particular quarters or years. P&G has defined benefit retirement plans. FY20 is $156 million, which we see as pretty modest for a company with P&G’s financial strength.
COMPANY DESCRIPTION
Procter & Gamble, with headquarters in Cincinnati, and sales in over 180 countries, manufactures daily-use household, personal care, food and paper products. The company’s major brands include Tide, Gillette, Pampers, Bounty, Crest, Ivory, Head & Shoulders, Scope, Oral-B, Swiffer, and Tampax and Charmin. Approximately 47% of their sales come from North America, 22% from Europe, 10% from Asia Pacific, 9% from Greater China, 6% from Latin America, and 6% from India, Middle East & Africa.
