Procter & Gamble (PG) recently lowered its sales and earnings outlook for the final quarter of fiscal 2012, marking the second successive cut in the company’s guidance in the last two months.
Management blamed the latest guidance cut on lower-than-expected top-line growth due to a slowing global economy, sluggish market share growth in the developed countries and China, and foreign exchange headwinds. P&G is witnessing sluggish growth principally in North America and Western Europe, due to weak economic conditions and market share declines.
Moreover, rising commodity costs are hurting the company’s margins. Other short-term headwinds include business disruptions in Venezuela, import restrictions in Argentina and negative impact of foreign exchange. We have thus downgraded our rating on P&G from Neutral to Underperform as most of these issues are expected to persist and pressure earnings in the near term.
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