Procter & Gamble Hits Resistance After Missing Earnings Estimates

| About: The Procter (PG)
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Recently Procter & Gamble (NYSE:PG) released an earnings report that missed its consensus estimates and as a result has hit some price resistance as this hourly trading chart provided by Barchart shows:

(Click charts to expand)

The Procter & Gamble Company provides consumer packaged goods in the United States and internationally. The company offers beauty products, such as cosmetics, female antiperspirant and deodorant, female personal cleansing, female shave care, hair care, hair color, hair styling, pharmacy channel, prestige products, salon professional, and skin care products under the Head & Shoulders, Olay, Pantene, and Wella brands; and grooming products, including electronic hair removal devices, home small appliances, male blades and razors, and male personal care products under the Braun, Fusion, Gillette and Mach3 brands.

It also provides healthcare products comprising feminine care, gastrointestinal, incontinence, rapid diagnostics, respiratory, toothbrush, toothpaste, water filtration, and other oral care products under the Always, Crest, and Oral-B brands; snacks and pet care products under the Iams and Pringles brands; fabric care and home care products consisting of laundry additives, air care, batteries, dish care, fabric enhancers, laundry detergents, and surface care products under the Ace, Ariel, Dawn, Downy, Duracell, Gain, Tide, and Febreze brands; and baby care and family care products, such as baby wipes, diapers, paper towels, tissues, and toilet paper products under Bounty, Charmin, and Pampers brands. The company sells its products in approximately 180 countries through retail operations, including mass merchandisers, grocery stores, membership club stores, drug stores, department stores, salons, and high-frequency stores. The Procter & Gamble Company was founded in 1837 and is based in Cincinnati, Ohio. (Yahoo Finance profile)

Factors to consider

Barchart technical indicators:

  • 16% Barchart technical sell signal
  • Trend Spotter sell signal
  • Although above its 20-day moving average it is below it 50- and 100-day moving averages
  • Only 4.98% off its 1-year high
  • Relative Strength Index 48.22%
  • Barchart computes a technical support level at 64.17
  • Recently traded at $64.36, slightly below its 50-day moving average of 65.12

Fundamental factors:

  • Widely followed on Wall Street with 16 brokerage houses assigning 24 analysts to monitor the numbers
  • Analysts predict revenue will increase by 3.70% this year and another 3.00% next year
  • Earnings estimates are for an increase of 2.30% this year and additional increase of 8.40% next year and a continued increase of 8.83% annually over the next 5 years
  • These consensus estimates result in analysts releasing 7 Strong buy, 8 buy, 8 hold and under perform and no sell recommendations to their clients
  • Analysts feel if all their predictions are hit the investors should see a 12% -15% total annual return over the next 5 years
  • The stock's P/E ratio of 16.39 is in line with the market P/E of 15.10
  • The 3.26% dividend, which is about 47% of estimated earnings, is slightly higher that the 2.20% dividend rate of the overall market
  • The company enjoys an A++ financial strength rating
  • Both the price stability ranking and the earnings predictability ranking are in the 100 percentile
  • All divisions had top line growth
  • High advertising costs coupled with high commodity prices and unfavorable exchange rates had a lot to do with the earnings disappointment

General investor interest:

  • I still use Motley Fool to gauge the individual investor sentiment and 7,578 readers are following this stock
  • The readers vote 97% that the stock will beat the market
  • The more experienced ans savvy All Stars voted 98% for the same result
  • Fool notes that 97% of articles about the stock have been positive
  • Among those with positive comments were Tobin Smith, Jim Cramer, Bob Olstein, Pat Dorsey and Chris Davis

It's important to compare the price of the stock with its major competitors over the past year. While PG was up about 1%, Johnson & Johnson (NYSE:JNJ) was up 7%, Kimberly-Clark (NYSE:KMB) up 10% and Colgate-Palmolive (NYSE:CL) was up 18%

Summary: It would seem that Procter & Gamble will continue to make money as the economy improves and there is no reason to sell at this level. I'd look for the company to break through the resistance during the next quarter. I'd advise against adding new money to your position and if you just have to be in the consumer product sector look how the market seems to be favoring the competition. Positions that are holding should monitor the high and low turtle channels to gauge support and resistance levels:

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