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What Can We Expect from Procter & Gamble’s Earnings?

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2Q16 earnings recap

Procter & Gamble (or P&G) (PG) will announce its fiscal 3Q16 earnings on April 26, 2016. The Wall Street consensus analyst estimate for adjusted EPS (earnings per share) is $0.82. The estimate represents an 11.5% fall year-over-year compared to fiscal 3Q15.

In fiscal 2Q16, P&G’s adjusted EPS fell 1.4%, but core adjusted EPS increased 9% to $1.04.

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Earnings versus peers

Excluding the impact of negative foreign currencies, core earnings increased 21% for fiscal 2Q16. Diluted net EPS increased 37% to $1.12, primarily driven by non-cash impairment charges related to the Batteries business in the base period.

Similarly, Clorox’s (CLX) fiscal 2Q16 diluted EPS increased 18% to $1.14. It was driven by gross margin expansion and volume growth of 1%. Adjusted EPS for Kimberly-Clark (KMB) increased to $1.42 in 4Q15 compared to EPS from continuing operations of $1.35.

However, Colgate-Palmolive’s (CL) diluted EPS fell 3.9% to 0.73 due to the negative impact of foreign currencies. To learn more about Colgate’s 4Q15 results, you can read Colgate’s 4Q15 Results: Earnings Bring Smiles but Sales Dwindle.

Stronger US dollar

A stronger US dollar continues to impact P&G’s revenues and earnings. The company derives ~63% of its revenue from outside the United States. The dollar has more than doubled against the ruble in the last two years. P&G’s euro and yen functional competitors such as Unilever (UL) face a 50%–60% impact.

According to P&G’s chief financial officer Jon Moeller, recent economic and political instability have impacted incomes and consumption in important markets such as Russia and the Ukraine, and the balance of Venezuela and Brazil has increased, which could impact P&G’s results.

P&G makes up 4.1% of the iShares Morningstar Large-Cap Value ETF (JKF).[1. updated April 16, 2016]

In the next parts of the series, we’ll look at the impact of foreign currencies on P&G’s wide geographical coverage and recap its fiscal 2Q16 margin.

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