Consumer products giant, The Procter & Gamble Company (PG - Analyst Report) recently reduced its fiscal 2014 sales and earnings forecasts to reflect the impact of higher-than-expected currency headwinds.
Core earnings per share are expected to grow in the range of 3%–5% in fiscal 2014 down from 5%–7% to reflect currency rate fluctuations in Venezuela and recent currency devaluations by several other developing countries. Currency headwinds are now expected to hurt 2014 earnings by 9%, higher than 7% as expected earlier. On a constant currency basis, core earnings are still expected to grow 12%–14%.
Net revenue growth is expected between 0% and 2%, down from 1%–2% due to higher-than-expected currency headwinds. Currency is now expected to hurt revenues by 2%–3%, higher than 2% as expected earlier. However, organic sales are still expected to increase between 3% and 4% in fiscal 2014.
In addition to the Venezuelan bolivar swings, the earnings outlook was adjusted to reflect the devaluation of the Argentine peso, Turkish lira, South African rand, Russian ruble, Ukrainian hryvnia, Brazilian real and several other currencies to the United States dollar.
It is noteworthy that last year too P&G had lowered its financial outlook to reflect headwinds from Venezuela’s currency devaluation. With around 60% of the company’s business generated outside North America, weakness in developing countries’ currencies lowers the value of revenues and profits earned in those markets.
Other Stocks to Consider
P&G carries a Zacks Rank #3 (Hold). Some better-ranked consumer staples companies include Post Holdings, Inc. (POST - Snapshot Report), Kraft Foods Group, Inc. and The Hain Celestial Group, Inc. (HAIN - Analyst Report). All these stocks carry a Zacks Rank #2 (Buy).