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Procter & Gamble (NYSE:PG) is set to release its 3rd quarter 2012/13 earnings results on Wednesday, April 24th, at 8:30 am ET. Below I have provided an update of the quarter as well as an overview of earnings expectations.

Profile and Estimates

Procter & Gamble has a market cap of $218.18 billion and currently trades for $81.32 per share. Shares are up 18.61% YTD and trade 41.14% above their 52-week low of $57.61. Analysts have a mean target price of $81.22 and a median price target of $81.00 on the shares. Twenty four analysts have an average third quarter earnings per share estimate of $0.96 on estimated revenues of $20.74 billion. Procter & Gamble has beat earnings estimates in each of the last four quarters.

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Fundamentals and Highlights (Sources cited below article)

Positives

  • 2.81% dividend yield, declared 7% increase on April 15th.
  • P/B of 3.3 and D/E of 0.4 which are both below the industry averages 4.5 and 0.5 respectively.
  • Three year average revenue growth rate of 3.0% which is above the industry averages 1.4%.
  • Operating margin of 17.8%, net margin of 15.5% and ROA of 9.4 which are all above the industry averages 14.6%, 9.9% and 8.3 respectively.
  • Core EPS was up 12% last quarter.

Negatives

  • P/S of 2.8 is above the industry averages 2.2.
  • ROIC and ROE has declined in each of the last two years, was 10.71% and 16.72% last year respectively.
  • Stock is up a lot this year and trades near its full year price target could be topping out and susceptible to a pullback.
  • Per Morningstar.com:

Slowing growth rates around the world, competitive pricing, and unfavorable foreign-exchange trends have played a part in Procter & Gamble's woes, but we think the problems run deeper, as the firm may have overextended itself in its endeavors to build out its product portfolio and geographic footprint. Given that it operates as the leading global household and personal-care firm, we previously assumed management would've combated these headwinds by selling non-core businesses, repositioning its product portfolio toward more value offerings, significantly increasing spending to reclaim market share, and aggressively expanding overseas. While P&G was slow to react, management has responded with a massive $10 billion cost-saving plan to dramatically reduce head count, aiming to return to 8%-10% earnings per share growth and free up funds to reinvest in its business. This overhaul is sizable but necessary, although we're not entirely convinced the firm can pull it off.

Bottom Line

Procter & Gamble shares may have topped out and investors should look for signs of cost cutting this quarter because macro indicators would suggest a low growth environment. As the Morningstar.com quote above indicates, analysts are skeptical towards PG's recent non-core acquisitions so any positive news or growth from this segment would be a win for management. I feel shares are close to fully valued and as a non-shareholder, I would wait for a pullback from current levels before initiating a position.

Sources

In addition to the links above, ratios and financial data was sourced from Morningstar.com, which you can find here and here.

Other company data was sourced from the 2nd quarter earnings report that can be accessed here.

Source: Have Procter & Gamble Shares Topped Out? Highlights And Earnings Expectations