A.G. Lafley, former chairman of the board and chief executive officer of Procter & Gamble
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Former Procter & Gamble CEO Bob McDonald
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Former P&G CEO Lafley rips hedge fund managers, endorses CEO Bob McDonald

Analysts expect $1.11 earnings per share from P&G

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Dan Monk Q&A with A.G. Lafley

CINCINNATI - When Procter & Gamble Co. reports second-quarter earnings Friday morning, there will be one investor not looking for the kind of earnings growth that Wall Street has been demanding from the Cincinnati-based consumer products giant.

That investor is A.G. Lafley, former P&G CEO.

"Too much of the stock market has become a casino driven by hedge funds and day traders," said Lafley, in a Jan. 18 interview to promote a new book about strategy.  "There is way too much emphasis on short-term accounting and financial results."

Analysts are expecting P&G to deliver 1 percent earnings growth, with a profit of $1.11 per share on revenue of $21.9 billion when the results are announced Friday morning.

Earnings calls have taken on increasing importance for P&G in the last year because hedge fund investors, led by Pershing Square Capital Management CEO Bill Ackman, have been buying shares and agitating for change.

Ackman told CNN Money recently that P&G CEO Bob McDonald has lost the confidence of senior managers and is probably not the right leader for Cincinnati's second largest company. The company called Ackman's remarks an "unnecessary distraction" and repeated that P&G's board supports McDonald.

Lafley said McDonald is doing a good job and it's absurd to judge P&G's performance based on financial metrics delivered quarterly.

"He doesn't have a single business that has a business cycle as short as a quarter," said Lafley. "Some of his business cycles are multi-year. When you're looking at how a company performs in its industry, it's absurd to look at quarters."

Lafley also questioned whether hedge fund investors have the interest of P&G shareholders at heart.

"P&G shareholders are individuals and long-term holders," he said. "The short-term guys, they're going to try to put pressure on the company because that's how they think they make money. Frankly, they don't have the interest of the company,  the interest of the employees, the interest of all the other shareholders in mind. They're trying to make a fairly quick buck."

To read a full Q&A with Lafley, go to http://www.wcpo.com/dpp/money/business_news/lafley-qa-former-pg-ceo-talks-corporate-strategy-in-new-book .

Dan Monk covers business for WCPO Digital. Reach him at daniel.monk@wcpo.com .

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