Saturday, August 3, 2013

Earnings Commentary: Procter & Gamble (PG)


Adjusted closing price per share on 7/31 (night before earnings): $80.3
Adjusted closing price per share on 08/01 (after earnings): $81.64
Closing price on Friday 08/02: $81.29

Hello my dear readers!

Earnings commentary season (AKA earnings season) is shortly coming to a close so I will be wrapping up my final commentaries this upcoming week. I only have one more stock to report on and then we will move on in to other investment-related topics which I am very excited to blog about. As a reminder, this blog is dedicated specially for my investors just starting out or the seasoned ones who may want a reminder and/or refresher on the basic (yet so important) topics of investing. So, stay tuned and thank you for stopping by!

PG is up over 19% in less than one year (purchased around November 2011) and again, it is a solid stock which pays dividends (big shock there! ha!).

So, im sure you've heard the name but did you know that PG is one of those companies that make products that people need no matter whats going on in the economy?! I'm sure you need toilet paper, laundry detergent, and toothpaste (at least I hope so). Here are just some of the most common brands made by PG: 



Just a reminder that we never know what can happen in the market (if I knew, I would be a billionaire right now). So, although a stock may continue to increase in price doesn't necessarily mean it will continue doing so indefinitely so is important to do your homework and remain aware of the important news that surround any company where you own shares. 

PG wrapped up fiscal year results during their recent earnings report on 08/01/2013. Results were a bit lukewarm. Nothing 'overly exciting' was noted. However, management did their job and thankfully had nothing alarming to report. Here are some highlights:

-A 5% increase in annual earnings 
-Organic sales growth of 3% (they had provided an estimated range of 2-4% during last year's forecast, and fell right within expectations).
-Strong volume growth in their health, baby, and home care segments which showed increased in gains of about 4%
-Slight loss on profitability due to expenses exceeding costs of production

It's important to know that PG is going through a transitory period where they are working hard to regain market share (one of their main competitors is Uniliver). During their earnings call it was announced that PG was able to maintain or grow market share on most of its brands during the last quarter especially in the U.S. 

PG also takes good care of its shareholders. They reported spending $12.5 billion (110% of earnings) on dividend payouts and share repurchases. It also announced plans to continue this trend for the next year. This sounds amazing. However, I have to admit I am a little apprehensive considering that they should also be putting earnings back in to the company to assist in the restructuring. A good chunk of their earnings should be targeted towards research and development, creating new products (and/or increasing advertisement on existing ones) in order to continue regaining their market share. PG has a lot of cash on their balance sheet and is a solid company that has been around for ever. However, when I see a company giving back more than earnings to shareholders it makes me wonder where the extra 10% is coming from. I will be taking a look at some of their financial statements in order to further my research and see what exactly may be going on. Sometimes homework needs to be taken a step further!

 All in all, the current CEO, Mr. AG Lafley,  was honest and straight forward with shareholders in admitting that  2014 will continue to be a transition period for PG. Hence, I will be keeping a close watch on the stock as it moves along. 

PG is still another one of those solid companies for the long term and which hold a very respectable brand. This is not a "new" company by any means. PG was established in 1837 and has been paying dividends since 1957! Like any corporation (specially one that's been around for over 100 years) there are always cycles that they have to go through and is normal for corporations. Hence nothing to panic about here in my personal opinion. Just do your homework and stay on the watch!

DIVIDEND PAYOUT INFORMATION:
Annual dividend yield: $2.96 %, which translates in to an annual payout of $2.41 per share. 

QUESTION: Look around your home, how many products made by PG do you own? How would you feel about a company that gives back 110% of their earnings to shareholders? 


Disclosure: I do not personally have a position in PG at this time but did acquired it for a client's diversified portfolio. This is NOT a recommendation to invest in PG. Do not invest or cease to invest solely on the information contained in this post.

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Sources:
Dividend.com for PG
Yahoo! Finance PG
Fool.com Procter and Gamble