Finanalys'  Instablog

Procter & Gamble 2012 1Q results are slightly negative. Quarter earning are just the same as pas years 20,2 bn.$ wile earning before deprecation even deceased from 3,6 bn.$ to 3,4 bn.$ which is a decrease of -5%. This is due to 2% increase of cost of revenue and 3% increase in operating expenses. This has lead to earning margin decrease from 18% to 17%. If this will continue company will start losing its quit good positions.

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Revenue segments did not changed a lot. Fabric Care and Home Care which has the largest companies share 32% has decreased. In general companies results are slightly negative.

At balance sheet you see a little bit of improvement at Q1. Equity level has increased up to 49% and is around comfortable 1/2 zone, but return on equity has notably dropped. At Q1 it was 14,6% while at 2011 1Q it was 17,1%. But the weakest companies spot remains liquidity ratio, which has increased up to 0,86 but still remains below 1, which is not very dangerous, but could be a real trouble in hard time.

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Inventory and account receivable turnover is around 30 days, while account payable is 54 days. Negative liquidity ratio is driven by quit large other shot term parables which rose to 23 bn.$ out of which 11 bn.$ is a long term debt yearly repayment schedule and this is defiantly a not good thing as company generates 14 bn.$/year and most of it goes out of the company by dividends and share repurchases 0,8 bn.$ at Q1 alone and 2,3 bn.$ in last 9 months. Compared to 2011 1Q equity has decreased from 67,4 bn.$ to 65,9 bn.$ which means that company is spending more on share repurchase and dividends then its earning, which is a dangerous and risky path to chose. Cash flow from financial activity (borrowing) was negative few quarters in a row and was -5,7 bn.$ in las 9 months. On the other hand this improves companies equity and other ratios, but company could balance its shot/long term liabilities more. In general companies balance structure is risky.

Share value:

Companies share basic value is ~24$ (Δ+4%/23$ compared with Q4). Current market price is ~64$ (Δ-4%/67$). which shows that market is paying ~40$ more or 8,5 years of Net income before Depreciation earnings, which shows that companies shares are a bit over evaluated. If taking into account 1,5 bn.$ goodwill write-off at Q4 due to one time divestment yearly earnings should be around 14,3 bn.$/year or 5,2$/share which makes it ~8 year, never the less indicator is quit high taking into account risky balance sheet and decreasing earnings. Share profitability (Share market price/Net income before Depreciation) if not calculating goodwill write-off is8,1% which is average.

Company pays 0,56$/share/quarter dividend or ~3,5% dividend yield which is good.

Analysis source: Procter & Gamble 2012 1Q financial results

Previous analysis: Procter & Gamble 2011 4Q financial analysis

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.