Procter & Gamble (PG, Financial), one of the largest branded consumer products companies in the world (with products in more than 180 countries) presented at the Barclay’s Back to School Conference last Thursday. I wrote an article about the company last month when they reported fourth quarter and year-end earnings; here’s a quick refresher of some of the key takeaways from that call:
Net sales increased 10% in the quarter to $20.9 billion, bringing the total for the year to $82.6 billion, up 5% compared to 2010. Organic sales, which exclude acquisitions, divestitures and foreign exchange, grew 5% in the quarter and 4% for the year (roughly 1% ahead of underlying market growth rates). As noted by CFO Jon Moeller, “The growth was broad-based with increases in 5 of 6 reporting segments, 21 of 24 billion-dollar brands and 15 of our top 17 countries”.
Every segment saw a year-over-year sales increase, driven by developing markets, such as Greater China, India, the Philippines and Brazil, all which had volume growth in excess of 25%
Diluted net EPS for the quarter and the full year was $0.84 and $3.93, respectively; for the year, earnings increased 11%, strong growth considering the many challenges facing companies like Procter & Gamble in this environment.
For 2012, the company expects organic sales growth in the range of 3- 6%, along with 2-3 percent of positive foreign exchange impacts, bringing overall sales growth guidance to a range of 5- 9%. On the bottom line, they expect earnings per share in the range of $4.17 to $4.33, equal to 6%-10% YOY growth versus 2011 core EPS of $3.95. To date, analysts are expecting earnings of $4.29 per share on revenue of $87 billion (up 5%) in fiscal 2012.
Since that time (roughly five weeks), the stock is up right around 4%, compared to a 2% plus decline for both the S&P500 and the DJIA. Presenting at the conference were CEO Bob McDonald and CFO Jon Moeller; here are the things from the conference I found interesting:
The company entered fiscal 2011 with three objectives, two of which are measured quantitatively: Grow market share by growing organic sales ahead of market rates at 1-2%, and grow core EPS in the range of 7-9%. As noted by the company’s recent results, they delivered on these objectives (core EPS growth was 8%), “despite significant external challenges, including a $1.8 billion increase in commodity costs, little/no market growth in developed markets, and market disruptions ranging from political instability in the Middle East and North Africa, to the natural disaster in Japan.” In the past three years, in what has been the toughest economic environment since the Great Depression, and with rampant inflation in input costs, Procter & Gamble has put up 6%, 6%, and 8% core EPS growth; considering the economic backdrop and the company’s overall size, in addition to the continued focus on innovation and marketing, I would have to say that management has done a pretty darn good job.
P&G has held or grown market share in businesses representing approximately 60% of their global sales over the past five quarters. They have managed this while also increasing pricing over the past seven years, at a rate of 1% in FY 2011; they are estimating a 3-4% increase in overall pricing in fiscal 2012.
For fiscal year 2012, management expects to buy back roughly $6 billion in stock, and pay $6 billion in dividends. The history of dividends at P&G certainly is an impressive one: The company has paid a dividend for 121 consecutive years, and has increased it for the past 55 consecutive years at a rate of 9.5% per annum. In the past three, five and ten years, the company has increased it at a rate of more than 10% per annum, easily outpacing both peers and U.S. mega caps, both of whom have significantly cut back on the rate of dividend increases in the past three years; P&G common shares currently yield around 3.4%, putting almost any duration of government bonds to shame (30-year Treasury yields barely have them beat at 3.75%).
After Mr. Moeller finished his remarks, CEO Bob McDonald came on the call. He spent the majority of his time talking about innovation, which they consider to be “the lifeblood of our company.” He talked about the history of their product launches (such as Swiffer in 1998), and some of their upcoming game changers (be on the lookout for Tide Pods).
Mr. McDonald also touched on the consumer healthcare business; while the company currently has the second largest business in consumer healthcare, they only hold 6% of the estimated $200 billion global market, where they believe there is “tremendous opportunity for growth.” In March, P&G announced plans to form a partnership with Teva Pharmaceuticals (TEVA, Financial); management believes that this creates “a combination of capabilities this is unmatched in the consumer healthcare industry, and maybe unmatchable.”
P&G continues to innovate, expand their reach, and drive profitable growth; why anybody would rather buy some 10-year Treasury bonds (also known as return-free risk) is beyond me.
Net sales increased 10% in the quarter to $20.9 billion, bringing the total for the year to $82.6 billion, up 5% compared to 2010. Organic sales, which exclude acquisitions, divestitures and foreign exchange, grew 5% in the quarter and 4% for the year (roughly 1% ahead of underlying market growth rates). As noted by CFO Jon Moeller, “The growth was broad-based with increases in 5 of 6 reporting segments, 21 of 24 billion-dollar brands and 15 of our top 17 countries”.
Every segment saw a year-over-year sales increase, driven by developing markets, such as Greater China, India, the Philippines and Brazil, all which had volume growth in excess of 25%
Diluted net EPS for the quarter and the full year was $0.84 and $3.93, respectively; for the year, earnings increased 11%, strong growth considering the many challenges facing companies like Procter & Gamble in this environment.
For 2012, the company expects organic sales growth in the range of 3- 6%, along with 2-3 percent of positive foreign exchange impacts, bringing overall sales growth guidance to a range of 5- 9%. On the bottom line, they expect earnings per share in the range of $4.17 to $4.33, equal to 6%-10% YOY growth versus 2011 core EPS of $3.95. To date, analysts are expecting earnings of $4.29 per share on revenue of $87 billion (up 5%) in fiscal 2012.
Since that time (roughly five weeks), the stock is up right around 4%, compared to a 2% plus decline for both the S&P500 and the DJIA. Presenting at the conference were CEO Bob McDonald and CFO Jon Moeller; here are the things from the conference I found interesting:
The company entered fiscal 2011 with three objectives, two of which are measured quantitatively: Grow market share by growing organic sales ahead of market rates at 1-2%, and grow core EPS in the range of 7-9%. As noted by the company’s recent results, they delivered on these objectives (core EPS growth was 8%), “despite significant external challenges, including a $1.8 billion increase in commodity costs, little/no market growth in developed markets, and market disruptions ranging from political instability in the Middle East and North Africa, to the natural disaster in Japan.” In the past three years, in what has been the toughest economic environment since the Great Depression, and with rampant inflation in input costs, Procter & Gamble has put up 6%, 6%, and 8% core EPS growth; considering the economic backdrop and the company’s overall size, in addition to the continued focus on innovation and marketing, I would have to say that management has done a pretty darn good job.
P&G has held or grown market share in businesses representing approximately 60% of their global sales over the past five quarters. They have managed this while also increasing pricing over the past seven years, at a rate of 1% in FY 2011; they are estimating a 3-4% increase in overall pricing in fiscal 2012.
For fiscal year 2012, management expects to buy back roughly $6 billion in stock, and pay $6 billion in dividends. The history of dividends at P&G certainly is an impressive one: The company has paid a dividend for 121 consecutive years, and has increased it for the past 55 consecutive years at a rate of 9.5% per annum. In the past three, five and ten years, the company has increased it at a rate of more than 10% per annum, easily outpacing both peers and U.S. mega caps, both of whom have significantly cut back on the rate of dividend increases in the past three years; P&G common shares currently yield around 3.4%, putting almost any duration of government bonds to shame (30-year Treasury yields barely have them beat at 3.75%).
After Mr. Moeller finished his remarks, CEO Bob McDonald came on the call. He spent the majority of his time talking about innovation, which they consider to be “the lifeblood of our company.” He talked about the history of their product launches (such as Swiffer in 1998), and some of their upcoming game changers (be on the lookout for Tide Pods).
Mr. McDonald also touched on the consumer healthcare business; while the company currently has the second largest business in consumer healthcare, they only hold 6% of the estimated $200 billion global market, where they believe there is “tremendous opportunity for growth.” In March, P&G announced plans to form a partnership with Teva Pharmaceuticals (TEVA, Financial); management believes that this creates “a combination of capabilities this is unmatched in the consumer healthcare industry, and maybe unmatchable.”
P&G continues to innovate, expand their reach, and drive profitable growth; why anybody would rather buy some 10-year Treasury bonds (also known as return-free risk) is beyond me.
