One of the holdings in the portfolio of our Dividend Growth Newsletter, Procter & Gamble (PG), recently announced that it is cutting its fiscal-year 2012 fourth-quarter outlook. The firm lowered its earnings outlook for adjusted earnings per share to $0.75-$0.79 from a prior range of $0.79-$0.85. This adjusted outlook comes as a result of lower-than-expected growth in developed markets and foreign exchange fluctuations that will knock 4% off the top-line revenue figure for the fourth quarter. The firm also forecasted flat to mid-single-digits profit growth in fiscal year 2013 compared to 2012.
CEO Bob McDonald noted that the firm will not cut any spending on R&D, nor will it exit any emerging markets. The company has struggled to maintain sales volumes in some of its key segments, like oral products and skin care, personal care and cosmetics. Since the Great Recession, consumers have become more value conscious, which has hurt some of Procter & Gamble's premium priced brands. Still, with the divestiture of the snacks business complete, the company will be able to focus more resources on its core segments.
Though Procter & Gamble doesn't have tremendous upside potential from current levels, we think it will be able to work through short-term headwinds and provide investors with an attractive total return profile. The firm has paid a dividend for its entire 122-year history and has raised it for 56 consecutive years. We expect this trend to continue, and by extension, still hold the name in our Dividend Growth Portfolio.
Additional disclosure: PG is included in the portfolio of our Dividend Growth Newsletter.