Procter & Gamble (PG) quarterly profit climbs on strong sales
Posted by: in Marketing and AdvertisingFiled under: Earnings reports, Consumer experience, Competitive strategy, Marketing and advertising, Procter and Gamble (PG)
Consumer products maker Procter & Gamble Co. (NYSE: PG) reported this morning a rise of 14% in its fiscal second-quarter profit, helped by higher sales and cost-cutting measures.
Strength in emerging markets that offset slower growth in North America and Western Europe made the company’s quarterly profit rise up to $3.27 billion, or 98 cents per share. P&G had reported a profit of $2.86 billion, or 84 cents per share, in the same period a year ago. Analysts, on average, expected Procter & Gamble show earnings of 97 cents per share.
The company’s results also show a 9% jump in revenue to $21.58 billion, up from $19.73 billion a year earlier. P&G said its increase in revenue reflects double-digit sales gains in such products as Head & Shoulders hair-care line and Duracell batteries. Analysts had forecast $21.25 billion in revenue, according to Thomson Financial.
Based on its strong earnings numbers, Procter & Gamble also lifted its full year earnings outlook. The company now anticipates earnings between $3.46 to $3.50 per share, compared with its previous forecast for earnings of $3.46 to $3.49. For the third-quarter, P&G also predicted earnings between 79 cents per share and 81 cents per share. Analysts had forecast quarterly profit of 83 cents per share and fiscal 2008 earnings of $3.49 per share.
As one of its competitive strategies, Procter & Gamble plans to split its coffee business into an independent company later this year. P&G said in its press release it believes “the transaction will be good for the coffee business as the business will get greater priority and attention as a standalone company.”
Folgers Coffee Co. , which had sales of $1.6 billion last year, will be headquartered along with P&G in Cincinnati. The company prefers a split-off transaction than a spin-off one for Folgers because in such a situation its shareholders wouldn’t have to pay any taxes. A split-off also will bring lower annual earnings dilution.
Regardless of the strong fourth quarter, I’d anticipate some selling in the stock this day as a result of its earnings outlook. Wall Street has definitely been weary of an economic slowdown, so any forward looking statements that don’t exceed Wall Street estimates are going to result in some selling. By forecasting 79 to 81 cents earnings per share for its third quarter (as opposed to the 83 cents Wall Street had been expecting), Wall Street might pounce on the stock, despite the company’s strong second quarter results.
The market is looking for a weak open this morning, as concerns over the slowing American economy have resurfaced yet again. Yesterday’s 50 basis point cut by the Federal Reserve does not appear to be having the immediate impact that many traders had been hoping to see. Perhaps the market had already priced in a possible 50 basis point cut and were actually hoping to see another 75 basis point cut.
PG looks to be set to open the day down a little under 1% according to premarket indications.
Eliza Popescu is a financial writer for the online investment advisory service Investor’s Observer.
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