Procter & Gamble Co. (PG) reported modest results for the first quarter of 2011. Net earnings from continuing operations of $1.02 a share were 5% above the 97 cents a share profit posted in the year-ago period. Earnings were also above the Zacks Consensus Estimate of $1.00.
Procter & Gamble forecasts second-quarter 2011 net earnings from continuing operations and core earnings to be in the range of $1.05 to $1.11 per share, reflecting a 4%–10% growth rate. The guidance implies that P&G will continue to invest in innovation and various marketing program. The Zacks Consensus Estimate for the next quarter is $1.12 per share.
For fiscal 2011, the company reaffirms its net earnings from continuing operations and core earnings to be in the range of $3.91–$4.01 per share, a 11%–14% growth on a continuing operations basis and 7%–9% growth on a core basis. The Zacks Consensus Estimate for fiscal 2011 is $3.98.
Revenue and Margins
On a year-ago basis, P&G’s net sales advanced marginally by 1.6% to $20.1 billion in the first-quarter 2011. Quarterly revenues missed the Zacks Consensus Estimate of $20.2 billion. Excluding the impact of acquisitions, divestitures and foreign exchange, organic sales progressed 4% in the reported quarter. Two of the three global business units (GBU) witnessed net sales growth during the quarter.
On the back of a solid innovation program and marketing investment, the company reported unit volume growth throughout fiscal 2010. Quarterly volume grew 8%.
Procter & Gamble, the leading manufacturer and seller of consumer goods, projects net sales and organic sales (based on solid volume momentum, partially offset by product mix and pricing) to inflate 2%–4% and 3%–5%, respectively, in the second quarter of 2011. For fiscal 2011, net sales and organic sales are expected to grow by 3%–5% and 4%–6%, respectively.
For the second quarter, net sales are expected to benefit about 1% from the impact of acquisitions and divestitures, but offset by 2% due to negative currency translation. For fiscal 2011, acquisitions and divestitures are expected to have a neutral impact on net sales, while unfavorable currency translation is expected to impact revenues by 1%–2%.
Gross margin for the quarter was flat year-over-year, while operating margin contracted 9 basis points (bps) to 22.3%, compared with 22.4% in the year-ago quarter, primarily due to a 71 bps increase in selling, general and administrative expenses (SG&A) as a percentage of net sales.
Other Financial Updates
Procter & Gamble exited the quarter with cash and cash equivalents of $2,603 million and long-term debt of $21,464 million. The company spent $519 million for capital expenditures.
The company continues to enhance shareholders’ returns by spending $3.0 billion on share repurchases.
Based in Cincinnati, Ohio, Procter & Gamble shares maintain a Zacks #2 Rank, which translates into a short-term “Buy” recommendation. However, our long-term recommendation for the stock remains “Neutral”.
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