Key takeaways from the fiscal fourth quarter
Procter & Gamble (PG) released its fiscal fourth-quarter earnings results on July 31. The company’s earnings contained many positive takeaways, but persisting sales and margin headwinds are likely to restrict its upside in the near term. Its net sales were in line with analysts’ consensus estimate thanks to improvements in its volumes. However, lower pricing continues to be a headwind.
Margins remained suppressed as cost headwinds led by commodity inflation and shipping costs more than offset the benefits of productivity savings. Despite taking a beating on margins, Procter & Gamble continued to impress with its bottom line performance.
The company’s adjusted EPS marked healthy growth. It outperformed peers Kimberly-Clark (KMB) and Colgate-Palmolive (CL) and came in ahead of analysts’ consensus estimate for the 13th consecutive quarter.
Procter & Gamble is witnessing improving trends across major categories and countries, especially China, the United States, and India. The company is increasing its pricing to offset the negative impact of commodities, a move that could support its margins.
However, pricing is expected to remain low in the near term as competition remains high, which will likely affect the company’s organic sales growth rate and margins. Adverse currency rates and higher commodity and shipping costs will also likely continue to hurt the company’s profit margins.
Overall, Procter & Gamble reported healthy fiscal fourth-quarter results. However, persisting challenges are expected to take a toll on its financials in the first half of fiscal 2019.
Stock performance so far
Procter & Gamble stock has fallen 12.0% YTD (year-to-date) as of July 31. Meanwhile, other major consumer packaged goods stocks Kimberly-Clark, Colgate-Palmolive, and the Clorox Company (CLX) have also underperformed the S&P 500 Index, falling 5.6%, 11.2%, and 9.1%, respectively, YTD.