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Procter & Gamble Stock: Analysts Are Upbeat after Q4

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Aug. 1 2019, Published 7:35 a.m. ET

  • Several analysts raised the target price on Procter & Gamble stock after its fourth-quarter earnings.
  • Procter & Gamble had stellar organic sales growth.
  • The company has a strong positive surprise history.

Procter & Gamble (PG) ended fiscal 2019 on a strong note. The company’s fourth-quarter organic sales growth was the best in a decade.  Analysts are upbeat about Procter & Gamble stock. Balanced growth in volumes, pricing, and mix drove Procter & Gamble’s organic sales, which increased 7% in the fourth quarter.

Meanwhile, productivity savings and share repurchases supported the company’s bottom line, which beat analysts’ estimate for the 17th consecutive quarter. On average, Procter & Gamble beat analysts’ expectation by an average of 4% in the last 17 quarters.

Several analysts raised their target price on Procter & Gamble stock following the company’s upbeat performance in fiscal 2019. Analysts made the following upward revisions in their target prices.

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  • Wells Fargo increased its target price to $135 from $125.
  • Jefferies raised its target price to $123 from $106.
  • RBC has a target price of $105 from $89.
  • Evercore ISI increased its target price to $130 from $115.
  • SunTrust Robinson raised its target price to $120 from $100.
  • Stifel now has a target price of $117 from $103.
  • UBS raised its target price to $122 from $102.
  • Citigroup increased its target price to $136 from $115.

Analysts have a consensus target price of $122.62 per share on Procter & Gamble stock, which implies an upside potential of 3.9% based on its closing price of $118.04 on Wednesday.

Among the 23 analysts covering Procter & Gamble stock, 12 recommended a “buy,” ten recommended a “hold,” and one recommended a “sell” rating.

Procter & Gamble’s outlook

We’re impressed with Procter & Gamble’s financial performance. We expect the company to sustain the momentum in fiscal 2020. Procter & Gamble’s underlying sales will likely benefit from higher pricing and volumes. Premium innovation should support the company’s underlying sales. Management expects 3%–4% growth in organic sales in fiscal 2020.

Benefits from higher sales and productivity savings will likely support Procter & Gamble’s margins and EPS. Management expects the adjusted EPS to increase 4%–9% in fiscal 2020.

While we expect Procter & Gamble stock to benefit from an improvement in the base business, the upside seems limited. The stock has risen 28.4% YTD (year-to-date), which implies that the stock price reflects positives. Procter & Gamble trades at a forward PE ratio of 24.3x, which seems high on a projected mid to high-single-digit EPS growth rate.

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