Procter’s earnings are starting to show weakness in the fourth quarter

Procter & Gamble (NYSE:PCG) is an American multinational consumer goods company headquartered in Cincinnati, Ohio. P&G 29. reported income toth Shares were down 4% in pre-market on July 2022, and results.


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“Fiscal year 2022 was another strong year,” said John Moller, chairman, chairman and chief executive officer of the board. “The P&G team’s execution of our integrated strategies delivered strong top-line growth, earnings growth, and significant cash returns to shareholders in the face of severe cost and operating headwinds. As we look forward to fiscal 2023, we are facing significant headwinds.” We look forward to another year of we are committed to our integrated strategies of excellence, productivity, creative disruption and an agile and accountable organization structure. They are the right strategies to move forward in the near-term challenges that lie ahead of us and achieve balanced growth and The value continues to build.”

Prudential Management Leads to Another Strong Quarter

Proctor posted revenue of $19.52 billion for the quarter and management was keen to point out that the company performed better than expected on both the top and bottom line, despite facing a currency headwind of $3.3 billion. Fourth-quarter earnings per share were up 7% compared to the same quarter in 2021, but management has directed that total earnings will slow going forward.

Homecare and cleaning products grew 4% for the year, while baby feminine and family care segment sales grew only 2%. Beauty sales remained flat and skin care products grew 1%.

Net sales for the year were $80 billion, up 5% from the previous fiscal year. Earnings per diluted share (EPS), meanwhile, came in at $5.81. Operating cash flow came in at $16.7 billion and adjusted free cash flow productivity was 93%. The company returned $19 billion to investors in the form of buybacks and dividends for the year.

The company faced several hurdles during the quarter as sales from China and Russia continued on sectors such as beauty products. Lower volumes across all segments were primarily a result of issues arising from China and Russia.

Management continues to be cautious with its approach and understands that it is facing a number of issues globally as central banks continue to raise interest rates simultaneously to combat inflation, which in turn reduces purchasing power. influencing. EPS is expected to come in 2% higher for fiscal year 2023, and revenue is expected to come in approximately 3-5% higher with similar levels of organic sales.

P&G continues to be a well-known global brand selling everyday household items. The company had expected high single-digit revenue for the year and could achieve those goals next year as expansion into emerging markets begins to pay dividends.

Evaluation

Procter & Gamble is facing cyclical issues and valuations are slightly higher than what investors are comfortable with. The stock currently trades at 24x price-to-earnings and has a dividend yield of 2.5%. Considering the US 10-year Treasury is now trading around 3%, there is a chance the stock could see a slight decline, especially if growth remains weaker than expected. In addition, the company’s net profit margin has been higher than expected over the past year or two, and this may begin to change, especially as inflationary pressures continue. So far, P&G has been able to maintain a net profit margin of 17-18% by passing the cost on to the consumers. But despite the company’s entry into the consumer durables category, the strategy has limitations.

Debt on equity remains low and management has indicated it will continue to reduce debt, with long-term debt currently standing at $22 billion, but the balance sheet is relatively safe for now. Cash for the fiscal year declined to $10 billion, primarily due to buybacks and dividends. The current ratio of the company also remains good at 4:1 and there is very little chance of any major debt related issues coming up.

P&G has strong institutional ownership, but insiders continue to sell

P&G remains a blue-chip stock and has a five-year beta of .39, making it a stock that isn’t very volatile. The company’s largest institutional investors include Vanguard, State Street Advisors and T.Rowe Price, all names well known in the industry. But over the past few quarters, company executives and insiders have sold shares, as many probably believe the stock is just peaking.