Procter & Gamble Co. (PG) inches forward again on April 8 to close at $78.79 per share; up by $0.56 or 0.72% from the previous day and getting closer to its one year target estimate pegged at $80 by Nasdaq. PG has been in upward trend since hitting the bottom in 52 weeks on June 26 at $59.27. Since then, the share prices rebounded and have gained 32.93%; for the fiscal year 2013, the share prices jumped by 13.54% from $69.39 on January 2. Amid the close-to-one year bullish run, there are now growing concerns on whether PG will start to correct anytime soon; or will it be able to sustain its rally.
PG Financial Highlights
The relatively extended bullish run of PG should be nothing to worry about; it is duly supported by strong financials and growing confidence by the investors. The company continues to generate revenues year over year, and the world's largest consumer products firm snapped up an astounding 138% increase in net earnings for the 4th quarter of 2012 at $4.08 billion.
Year over year, PG observed growth in net sales. It ended the last full fiscal year with net sales of $83.68 billion, which was slightly higher than the 2011 figure at $82.556 billion. This amount is 4.5% increase from the net sales of $78.938 billion in 2010.
While net sales were increasing, the net earnings were decreasing. Over a 5-year period, 2009 observed the highest net earnings at $13.436 billion. On the following year, the net earnings saw a slight decrease by 5.2% at $12.736 billion. This further declined in 2011 to $11.797 billion. PG reported net earnings of $10.756 billion in 2012 with a -8.82% growth rate.
Earnings Per Share
Despite the negative growth rate in earnings, PG did not incur losses but it was successful in generating quarterly earnings per share that are consistently beyond the consensus forecast. On the first quarter of 2012, PG reported an EPS of 0.94 against the 0.92 forecast. In the second quarter, the EPS of PG again beats the estimate of 0.77 to end at 0.82. The same scenario was observed in the third quarter at 1.06 versus 0.96.
In the fourth quarter, the consensus EPS forecast was 1.11 and the company ended at 1.22 with 9.91% surprise. Having an EPS that regularly exceeds expectations is a reflection of the company's efficiency in managing its operation and in making it profitable as well.
Another key financial component is the market capitalization of PG at $215.65 billion as of the latest report, which has grown from an average market cap of $175 billion over the last three years and up by 27.513% year to date. PG is now categorized under the mega cap companies, while its closest peers Colgate-Palmolive (CL) and Kimberly Clark (KMB) are still under the large cap category with market capitalization of $55.15 billion and $38.86 billion, respectively. This only shows the strength of PG against its competitors, and the overwhelming confidence of more investors on PG compared to its peers.
PG is a dividend stock with increasing dividend payouts. Quarterly dividends paid in 2010 were 0.4818. This was increased to 0.525 in the following year with 8.96% growth. Last year, the dividend payout was increased by 7.04% at 0.562 per share. The next dividend payout is not yet officially announced. Based on the yearly dividend growth, shareholders are expecting another round of dividend increase this year.
Analysts Ratings and Recommendations
Proctor and Gamble is one of Warren Buffett's stock picks. In fact, it comprises about 4.8 % of his portfolio. However, Warren Buffett has gradually reduced his exposure to PG and shifted his investment to Wal-Mart (WMT), which is another consumer defensive stock.
Over a period of five years, PG suffered a major plunge way back in the early months of 2009. From $62.80 per share at the start of that year, the prices were falling toward $44.18 by mid-March. However, PG recovered and bounced back to end the year at almost the same price level when it closed the fiscal year at $60.63. From thereon, the prices remained stagnant, trading within the $60 to $65 range from 2010 towards the second quarter of 2012.
On July of last year amid a downward trend, Bill Ackman, the founder and CEO of Pershing Square Capital Management, bought $1.8 billion in PG shares. This lifted the share prices up and revived the confidence of many investors. Since then, the prices were increasing and have already breached the 5-year high price level beyond $75. Today, it is moving towards the one year mean target estimate, and many analysts are speculating that this will be attained by middle of the year.
Yahoo Finance has a high target of $87. The low target of $73 was already achieved, and the share prices are now heading toward achieving the median target of $80.50. For the current month, majority of the analyst firms voted for Hold, while the rest have equal votes for Buy and Strong Buy.
Nasdaq, on the other hand, has a low target of $75 and a high target pegged similar with Yahoo Finance at $87, with median target at 80. Eleven out of twenty-one analyst firms recommended Strong Buy; nine voted for Hold, while only one advised to buy.
The above recommendations only show that PG is still a stock to watch for, amid the long rally. Its bullish run is supported by strong financial profile and outstanding revenues and earnings performances. The next earnings report is set to be released in the next few weeks, and if the figures are encouraging then the rally should persist probably towards the year-end and break not just the median target but the high target estimates, as well.