Shares in US consumer products firm Procter & Gamble (PG) rose after Q2 EPS beat forecasts by a couple of cents. Sales actually missed estimates marginally despite the firm raising prices to offset lower volumes.
| Share price: $149.20 (+2.1%) | PE: 21.1x |
| Market Cap: $345bn | Yield: 3% |
VOLUMES DECLINE
For the three months to December, P&G posted 1% growth in group sales to $22.21 billion. That was below the consensus forecast of $22.28 billion, with the company blaming weak US consumer spending for the miss.
Organic, or like-for like sales, which strip out acquisitions, disposals and currency moves, were flat on last year. Volumes sales, which normally grow around 3% to 4% per year, were down 1% in Q3.
By segment, LFL beauty sales were buoyant, up 4%, while LFL healthcare sales rose 3%. However, baby, feminine and family care sales fell 4% on a life-for-like basis.
Analysts suggested sales were partly affected by the US government shutdown in December, which impacted income and spending. For the full year, P&G maintained its target of flat to 4% like-for-like growth.
At the earnings level, however, the firm lowered its growth forecast from up 3% to 9% to up 1% to 6%. The firm blamed higher restructuring costs, while tariffs are expected to knock $400 million off this year’s earnings.
P&G is usually a good read across to UK companies like Reckitt Benckiser (RKT) and Unilever (ULVR). What today’s results tell us is the US consumer in particular is finding life tough.
Sales volumes were down in three of the firm’s five categories, with beauty the only area to show growth. The firm only managed to offset the volume drop with price rises, in a break with its previous strategy.
The rise in the share price is interesting as it suggests investors are gravitating towards ‘safe’ stocks. The US consumer staples segment is up this year, for example, while the ‘Mag Seven’ are down.
We’ll be keeping our eye out for Unilever when it reports in mid-February and Reckitt when it reports in early March.
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