Could Gillette’s Woes Mar Procter & Gamble Stock?



Analysts expect sales and earnings to improve

Procter & Gamble (PG) is expected to announce its fiscal 3Q18[1. fiscal 3Q18 ended March 2018] earnings on April 20, 2018. Analysts expect the company to sustain its sales growth momentum, thanks to its focus on innovation, expanded distribution, and in-store activity that it expects to lead to improved volumes.

Procter & Gamble’s bottom line is projected to improve on a year-over-year (or YoY) basis, reflecting improved sales, productivity, and cost-savings, as well as share buybacks and lower tax rates. However, analysts remain wary of the fact that near-term sales and margin headwinds could hurt its stock performance.

Procter & Gamble’s top line is expected to take a hit from the lower pricing of Gillette products as well as macroeconomic challenges in Algeria and Saudi Arabia. Retailer destocking inventory could also pressure its top line.

The company’s margins are expected to remain muted given the inflation in commodities and logistics costs. Price and brand investments could push margins lower and affect its EPS (earnings per share) growth rate.

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Stock performance so far in 2018

Procter & Gamble (PG) stock has disappointed so far this year. The company’s stock has fallen 14.9% on a YTD (year-to-date) basis through April 9, 2018. The stock prices of the company’s peers are also trading in the red owing to the industry-wide sales and margin headwinds.

The stock prices of Colgate-Palmolive (CL), Clorox (CLX), Kimberly-Clark (KMB), and Church & Dwight (CHD) have witnessed declines of 5.3%, 14.0%, 10.2%, and 1.4%, respectively. The S&P 500 (SPY) has marked a decrease of 2.3% on a YTD basis.


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