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With shares of Procter & Gamble (NYSE:PG) trading at around $76.57, is PG an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
Sound the alarm! Procter & Gamble has seen slowing growth, and it has lowered FY 2013 guidance. FY 2013 EPS has been lowered to $3.94 to $4.04 from $3.97 to $4.07. In a Wall Street sense, this is terrible news, but if you’re looking at this change in a macro sense, it isn’t cause for concern. Whichever way EPS plays out, it will still be an improvement over 2012. Q3 EPS expectations have been lowered to $0.90 to $0.96 from $0.91 to $0.97. The lowered guidance is primarily due to Venezuelan currency devaluation. Another negative is pricing pressure, but this ebbs and flows.
Sticking with the negative theme, some analysts feel as though Procter & Gamble has been too ambitious with its product line. Those analysts are probably correct. However, Procter & Gamble can always divest, which would quickly improve operations and act as a potential catalyst for upward stock movement.
On the positive side, Procter & Gamble has a plan of saving $10 billion by 2016. This will help the company reach its goal of improving manufacturing productivity by 5 percent annually. The aim is to reduce spending in supply chain, R&D, marketing and overhead. Approximately 5850 jobs have already been cut since February 2012.
Procter & Gamble will also aim for an increase in change innovations, which basically means improvements in current products. It has relied on this strategy for many years, and it has been a proven winner. The company has strong margins, operating cash flow of $14.41 billion, a dividend yield of 3 percent, and it expects organic sales growth between 3 and 4 percent. So at this point, it looks like an interesting blend of good news and bad news. Let’s take a look at some important numbers prior to forming an opinion on the stock…
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