Procter & Gamble Earnings Preview: Slow Turnaround Should Continue

| About: The Procter (PG)
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The nature of Procter & Gamble's (NYSE:PG) consumer brand business is that it is intensely marketing and brand driven, with an emphasis on premium-priced brands, which has not been the ideal niche for either the U.S. or the rest of the world, post 2008.

When PG reports its Fiscal Q3 '13 quarter before the bell on Wednesday, April 24th, Street consensus per ThomsonReuters is expecting $0.96 in earnings per share on $20.73 billion in revenues for expected year-over-year growth of 2% and 3% respectively.

Frankly, back in the day, PG generated mid to high single digit organic growth in both revenues and volumes. The last quarter PG generated 5% organic revenue growth and 3% organic volume growth, was June 2011.

Since the financial crisis in 2008, there is no question PG's volumes and revenues have lagged particularly in emerging markets, but I think that is in the earliest stages of being rectified, although it will take time.

In the meantime, last quarter PG generated it's first year-over-year gains in gross, operating and net margins in a few years, which tells me management is working on the cost structure and controlling as much as can be controlled internally, as they await development of their end markets.

Here is the last article we wrote on PG, and the stock has broken out to an all-time high in this market.

In fact I think PG is a perfect stock for this market as the emphasis on consumer staples, good dividend payers, stable and consistent earnings growth with good cash-flow generation is being rewarded a premium valuation today.

While PG is trading today at 20(x) and 18(x) Fiscal '13's and 14's projected EPS of $4.05 and $4.36, which is just 8% expected growth, PG generates prodigious cash-flow and has the rock-solid balance sheet to boot. PG's current dividend yield of 2.8% and with a free-cash-flow yield of 5%, there is little to worry about in terms of PG's capital allocation.

We'd buy a pullback to the $75 area, or the point of PG's all-time high prior to the recent breakout, however management is working to turn around the organic growth.

PG is fully-valued when earnings growth is mid-teens and the stock sports an equivalent multiple, which means that PG could trade to $100 if management can generate some growth.

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Disclosure: I am long PG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.