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Will Procter & Gamble Stock Maintain the Uptrend?

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Jun. 11 2019, Updated 12:29 p.m. ET

Procter & Gamble

Procter & Gamble’s (PG) impressive financial performance in the first nine months of fiscal 2019 has driven its stock higher. Procter & Gamble shares have risen 18.3% on a YTD (year-to-date) basis as of June 10. Continued strength in the company’s base business, as reflected in strong organic sales growth, has been the key catalyst behind the uptrend in Procter & Gamble stock. The company continued to beat analysts’ earnings estimate despite the heightened cost environment, which is encouraging.

The higher net price realization, improved organic volumes, premium innovations, and a favorable product mix have been driving Procter & Gamble’s organic sales higher. The improved base business, productivity savings, share repurchases, and a lower effective tax rate drove the company’s earnings.

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Other household and personal care product manufacturer shares have marked healthy gains in 2019. They have performed better than the broader markets due to benefits from higher pricing and an improved mix. Colgate-Palmolive (CL), Kimberly-Clark (KMB), and Church & Dwight (CHD) stocks have risen 22.7%, 18.2%, and 17.5% on a YTD basis.

Outlook

We’re impressed with Procter & Gamble’s financial performance in 2019. The company’s ability to drive organic sales and beat analysts’ EPS estimate is encouraging. We expect Procter & Gamble’s organic sales to continue to rise due to higher pricing, improved volumes, and a favorable mix. A lower effective tax rate, shares repurchases, and productivity could continue to drive the company’s earnings.

Healthy organic sales and earnings growth are expected to support Procter & Gamble stock if there’s a pullback. However, tough year-over-year comparisons and cost headwinds could restrict the sales and earnings growth rate and the upside in the stock. The company’s current valuation reflects the positives, which implies that the upside could be restricted.

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