Procter & Gamble

The Procter & Gamble Company ( PG - Analyst Report ) exceeded analysts’ earnings estimates for 13 straight quarters, and in 15 out of the past 16. The company increased profits, expanded gross margins and grew profits for five years running. PG continues to expand its portfolio of brand name products through both internal development and by acquisition. Growth in free cash flow has led to a current dividend yield of 2.0% and a five-year average dividend yield of 1.9%.

Full Analysis

The Procter & Gamble Company and its subsidiaries engage in the manufacture and marketing of various consumer products worldwide. The company’s products are sold through mass merchandisers, grocery stores, membership club stores and drug stores.

PG’s history of exceeding analysts’ earnings expectations is truly incredible. The company beat the Street’s estimate in 13 consecutive quarters and in 15 out of the past 16. PG matched the consensus estimate in the one quarter where it failed to surprise. Earnings per share grew 12.5% over the past five years and are forecasted to grow 11.1% over the next 3-5 years.

On Aug 2, PG reported fiscal 2006 fourth-quarter profits of $1.9 billion, or 55 cents per share. Analysts were calling for earnings per share of 54 cents. Revenues soared 25.1% to $17.84 billion from $14.26 billion in the prior-year period. Price increases across several of the company’s business segments, coupled with the business associated with its acquisition of Gillette, fueled revenue growth.

For the entire year, profits jumped 25.4% to $8.68 billion from $6.92 billion in fiscal 2005. Revenues climbed 20.2% to $68.22 billion from $56.74 billion last year. Chairman of the Board, President and Chief Executive A.G. Lafley stated, “This marks the fifth consecutive year in which P&G has delivered topline growth at or above the company's targets.” PG increased profits, expanded gross margins and grew profits for five years running.

PG continues to expand its portfolio of brand name products both through internal development and by acquisition. The company has also excelled at creating entirely new product categories. Recent examples of successful new categories include Swiffer in the surface cleaning category, the fat substitute Olean and Febreze in the fabric spray category.

PG’s free cash flow generation continues to be quite impressive. The company generated $6.5 billion of free cash flow in fiscal 2005. In fiscal 2006, it ballooned 33.9% to $8.7 billion. The excess cash is frequently put towards product innovations, acquisitions and brand development. Furthermore, PG has a current dividend yield of 2.0% and a five-year average dividend yield of 1.9%. The dividend was boosted last in March 2006 by 10.7% to 31 cents per share. The company has distributed dividends without interruption since it was incorporated in 1890. This year marked the 50th consecutive year in which the dividend was increased.

PG is a Zacks #2 Rank (Buy) stock. Zacks #2 Rank stocks have generated an average annual return of 21.6% since 1988. Because the Zacks Rank has a market cap bias, Growth & Income investors may find a greater number of large-cap stocks by considering both Zacks #1 Rank (Strong Buy) and Zacks #2 Rank (Buy) stocks in their selection criteria.