P&G earnings exceed expectations, as key products reclaim market share

P&G shares rising on positive earnings outlook

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CINCINNATI - Procter & Gamble Co. delivered 12 percent core earnings growth in its fiscal second quarter and increased sales and earnings outlooks for the full year.

P&G shares were up more than 3.5 percent for most of the day Friday.

The results provide concrete evidence that the company's $10 billion restructuring program is being used to grow market share and boost profits. One local money manager predicts it will weaken the argument for management changes at P&G, an argument recently made by hedge fund investor Bill Ackman.

"Today is a good day to be a P&G shareholder. Even Bill Ackman should be pleased," said Matt McCormick, vice president and portfolio manager at Bahl and Gaynor Investment Counsel Inc. downtown.

P&G doubled its net income from a year ago, generating a $4.06 billion profit, or $1.39 per share, on revenue of $22.2 billion. For the same period last year, net income was $1.69 billion, or 57 cents per share.

Excluding one-time costs, P&G delivered core earnings per share of $1.22, up 12 percent from a year ago. That's better than the company's previously announced earnings guidance, which advised shareholders to expect up to $1.13 per share. And it's better than the $1.11 consensus estimate by analysts who follow the company.

"We're growing share now in 60 percent of the U.S. business and if you look at our 20 biggest brands, 65 percent are growing share," CEO Bob McDonald told reporters Friday morning.

McDonald has been working on a plan to reinvest savings from P&G's restructuring programs into its biggest brands including Tide, Cascade, Gillette and Crest, with the goal of boosting market share and shoring up profits.

"All of those interventions are working," he said.

Analysts didn't mention the Ackman controversy in a conference call to discuss results. In a separate call with reporters, McDonald answered a question about shareholder activism by saying the company is focused on improving results.

"We want a higher share price just like our shareholders do," he said.

But McCormick said McDonald is "absolutely breathing easier" because of second quarter results.

"Clearly the momentum and results are on his side of the argument," he said. "There is no question that Ackman has been positive in making McDonald and P&G's board more nimble, more on their toes."

Other highlights from Friday's earnings report:

·      P&G increased its core earnings estimate for the 2013 fiscal year, ending in June. It expects between $3.97 and $4.07, up from a previous estimate of $3.80 to $4.

·      Tide Pods, the unit-dose laundry product that has been lauded as one of the most successful new product launches in years, will be expanded globally. The expansion will start with an Ariel-branded product in Europe.

·      P&G's restructuring program has now eliminated 5,500 positions, just 200 short of the goal announced last year. The company expects to complete the restructuring four to five months ahead of schedule.

·      P&G has increased its share repurchase program, a move that many investors will like because it makes outstanding shares more valuable. Previously, the company said it would invest between $400 million and $600 million in buy backs. Now, it's expecting between $500 million and $600 million.

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