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Procter & Gamble: Still Too Early To Lighten Up

Feb. 05, 2019 1:30 PM ETThe Procter & Gamble Company (PG)7 Comments
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  • The company beats on both sales and earnings in Q2.
  • We continue to see favorable tailwinds here.
  • Remaining long.
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We have been long Procter & Gamble (NYSE:PG) since around the $76 level. A few weeks back, the company, announced its fiscal second quarter earnings. Results were good. Both the top and bottom line came in ahead of expectation. Revenues hit $17.44 billion which was almost $300 million higher than what the market was expecting. Furthermore, earnings per share of $1.25 was $0.04 better than the $1.21 number predicted.

These positive trends led the firm to increasing its guidance with respect to company organic sales for the full fiscal year. Second quarter results definitely showed that customers still will buy quality merchandise if the value is there. We especially saw this in its healthcare & fabric and home care business. We have been consistent in our belief that renewed focus was always going to come to the firm as a result of the 100 brands having being removed from the firm. Innovation now seems to be back at P&G. As long as the company can continue to improve significantly on its products, customers will keep coming back for more.

This is why we would not rule out a strong recovery in the grooming business. If sales can gain traction here, it would really move the top line as the grooming segment makes up around 10% of sales. New packaging and a new razor launch (for men with sensitive skin) are the near-term events in order to try and move the needle here. Obviously, the customer does not feel he is getting enough value for the price he is paying at present. A host of cheaper alternatives have taken significant market share in this segment over the past. P&G is on a mission to rectify this as soon as humanly possible.

Shares currently trade at just above the $98 mark. This is a


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Analyst’s Disclosure: I am/we are 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.

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