Procter & Gamble (PG, Financial) is one of the world’s largest consumer goods company. With a robust presence in over 180 countries around the world, this Ohio-based company deals with frontend sales through e-commerce, local grocery stores, department stories and drug stores – serving over 5 billion people worldwide. The company offers many of the leading brands in five main segments: healthcare, baby and feminine care, home care, grooming and beauty. It has a market cap of $243.38 billion and is one of the most exciting and consistent performers on the market.
Procter & Gamble Retrospection
Procter & Gamble reported net fiscal 2014 core earnings to be $4.22 per share, which is a 5% increase from the previous year. The net sales were recorded at $83.1 billion, which saw a 1% increase from the year before. Also, the company declared that organic sales grew by over 3% owing to a 3% growth in volume sales. Profits owing to an increase in pricing strategy rose by 1%. The baby and feminine care and home care segments saw maximum organic sales growth of 4% each, while the beauty segment was flat.
On the backdrop of a strong sales year, Chairman, President, and Chief Executive Officer A.G. Lafley declared that the company delivered strong bottom and top line promises for the fiscal year gone by. He also declared that the company met its objectives, despite a difficult operating scenario – delivering robust currency growth earnings and building on a strong track record of providing good cash returns to shareholders every year.
The company also spent over $2 billion in R&D in 2014 – good news for investors because it is a promise of the company’s commitment to future growth. P&G has always held a good track record on the market for the last few decades. They are well known for paying dividends for 58 years at a compounded annual rate of 9%. 2014 saw the company repurchasing over $6 billion in shares from its shareholders. P&G stock has a 2.85% dividend yield – higher than the S&P 500’s average yield of 1.9% as on January 9.
Procter & Gamble Roadmap
For the fiscal year 2015, the company has projected organic sales growth to be in the mid single-digit range. The earnings per share is also being projected at the mid-single digit range. The company has also stated that they expect the negative impact of foreign exchanges on the 2014 Q4 earnings to be neutralized in the 2015 fiscal year.
The world’s biggest consumer products company also declared that it planned to shed over half of its brands in the next few years to focus on its top performing brands – planning to get rid of smaller brands that account for less than 10% of its sales. By clipping the product roster, the company hopes to put its energy behind products with larger sales potential – while trying to create a much leaner and focused organization.
The company also plans to revise its major beauty product lines, which are losing ground in an increasingly competitive market. 2014 showed the beauty segment to have a flat growth. With an increasing number of brands to choose from and the industry being flooded by ‘artisanal’ beauty products, there is a slight shift in customer movement. The company plans to make a change in strategy and redo the Pantene and Olay range of beauty products.
The announcement of its plans to shelve around 100 brands should not be taken as a catalyst for short-term re-rating of shares. The strategy appears to have merit where the company is planning to focus on building better scale for its successful brands that already contribute to 90% of its revenue – to enhance volume growth and compete more strongly in the market.
Last Words
All in all, Procter & Gamble has shown tremendously stable growth over the past years and have a history of good dividend payouts. This robust track record is proof that the company knows how to take care of its shareholders. Long-term investors certainly wouldn’t want to miss out on this stock in their investment portfolio.
