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Procter & Gamble Lifts Organic Sales Guidance on Strong Q3

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Organic sales to grow by a solid 4%

Procter & Gamble (PG) has impressed investors with its organic sales growth in the first three quarters of fiscal 2019. Higher pricing and a favorable product mix supported the company’s organic sales, which grew by 4% in the first half of the current fiscal year.

The company sustained momentum in the third quarter and posted organic sales growth of 5%, which is encouraging. Buoyed by its third-quarter performance, management expects its organic sales to rise a solid 4% in fiscal 2019. Earlier, it expected organic sales to grow by 2% to 4%.

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Stock performance

Procter & Gamble stock has recorded healthy growth so far this year and is up 15.3% on a YTD basis as of April 22. Notably, stocks of other major consumer packaged goods companies have also posted strong growth. Colgate-Palmolive (CL), Kimberly-Clark (KMB), and Church & Dwight (CHD) stock have increased by 16.9%, 14.3%, 12.2%, respectively, in that period.

While we are impressed with Procter & Gamble’s financial performance, its valuation looks unattractive. Procter & Gamble stock trades at a forward PE multiple of 23.0x, which seems expensive given the estimated mid-single-digit growth in its earnings in coming quarters.

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