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Here's Why Procter & Gamble is a Hot Investment Pick Now
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The Procter & Gamble Company (PG - Free Report) , popularly known as P&G, appears to be a solid bet driven by continued investments to aid business growth. The company is benefiting from ongoing initiatives to improve productivity. Moreover, it remains focused on product improvement, as well as packaging and marketing initiatives, which drive top and bottom lines. Also, its cost-saving plans appear to be aiding margins.
All these factors helped the company to deliver robust fourth-quarter fiscal 2019 results, wherein the company continued its positive earnings and sales surprise for the fourth straight time. Both the top line and the bottom line grew year over year. Moreover, the company provided upbeat guidance for fiscal 2020. (Read: Procter & Gamble Stock Up on Q4 Earnings & Sales Beat)
Quite apparent, analysts are steadily growing bullish on the stock. This is visible from the upward revision in the Zacks Consensus Estimate. For the fiscal year 2020 and fiscal year 2021, the Zacks Consensus Estimate has moved north by 8 cents and 9 cents to $4.84 and $5.15, respectively, in the past 30 days.
Driven by these upsides, shares of this Cincinnati, OH-based company have rallied approximately 18% in the past six months outperforming the industry’s growth of around 12%.
All said, let’s take a closer look at the aspects driving this Zacks Rank #2 (Buy) stock.
Solid Product Portfolio
P&G focuses on improving its product portfolio through initiatives, which enable it to concentrate on its fast-growing businesses. For this, the company relies on its strategy of acquiring complementary businesses. It also follows a systematic divestiture plan to streamline its portfolio. Notably, it has acquired a private company — This is L. — that produces period products with natural ingredients. This will aid in expanding its naturals product range, which is a key focus area for most day-to-day consumer product companies at present.
Some other recent acquisitions include the beauty brand — First Aid Beauty, the consumer health business of Germany-based Merck KGaA and Walker & Company Brands, all in 2018. These acquisitions should bolster the company’s product portfolio in various categories. Simultaneously, it divested several assets over the years as part of the portfolio-reshaping plan.
Cost Saving and Productivity Program on Track
P&G remains focused on productivity and cost-saving plans to boost margins. The company’s continued investment in business, alongside efforts to offset macro cost headwinds and balance top and bottom-line growth, underscore its productivity efforts. With cost savings and efficiency improvements across all facets of business, the company has crossed the mid-point of the second five-year (fiscal 2017-2021) cost savings target of $10 billion.
The second five-year restructuring plan targets cutting costs in areas including supply chain and cost of goods sold (COGS), marketing and digitization and promotional spend effectiveness. This plan comprises $7 billion in COGS savings ($4.5 billion from raw and packaging materials, $1.5 billion in manufacturing savings and $1 billion from transportation/warehousing/other); $2 billion of marketing cost reductions; $1.5 billion of trade spending savings (10% efficiency); and $1–$2 billion of additional overhead reductions.
Upbeat View
These actions have been driving the company’s robust quarterly performances over the years. Driven by strong organic sales performance, management provided upbeat guidance for fiscal 2020. The company projects both all-in and organic sales growth of 3-4% in fiscal 2020. Moreover, it anticipates core EPS growth of 4-9% for fiscal 2020 from $4.52 in fiscal 2019. It expects commodities, foreign exchange, transportation and tariffs to modestly aid earnings growth in fiscal 2020.
We expect all aforementioned factors to continue bolstering the company’s performance, and help it remain in investors’ good books.
Church & Dwight Co., Inc. (CHD - Free Report) has a long-term earnings growth rate of 8.7% and a Zacks Rank #2.
Colgate-Palmolive Company (CL - Free Report) , also a Zacks Rank #2 stock, has an expected long-term earnings growth rate of 5.5%.
Today's Best Stocks from Zacks
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This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
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Here's Why Procter & Gamble is a Hot Investment Pick Now
The Procter & Gamble Company (PG - Free Report) , popularly known as P&G, appears to be a solid bet driven by continued investments to aid business growth. The company is benefiting from ongoing initiatives to improve productivity. Moreover, it remains focused on product improvement, as well as packaging and marketing initiatives, which drive top and bottom lines. Also, its cost-saving plans appear to be aiding margins.
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All these factors helped the company to deliver robust fourth-quarter fiscal 2019 results, wherein the company continued its positive earnings and sales surprise for the fourth straight time. Both the top line and the bottom line grew year over year. Moreover, the company provided upbeat guidance for fiscal 2020. (Read: Procter & Gamble Stock Up on Q4 Earnings & Sales Beat)
Quite apparent, analysts are steadily growing bullish on the stock. This is visible from the upward revision in the Zacks Consensus Estimate. For the fiscal year 2020 and fiscal year 2021, the Zacks Consensus Estimate has moved north by 8 cents and 9 cents to $4.84 and $5.15, respectively, in the past 30 days.
Driven by these upsides, shares of this Cincinnati, OH-based company have rallied approximately 18% in the past six months outperforming the industry’s growth of around 12%.
All said, let’s take a closer look at the aspects driving this Zacks Rank #2 (Buy) stock.
Solid Product Portfolio
P&G focuses on improving its product portfolio through initiatives, which enable it to concentrate on its fast-growing businesses. For this, the company relies on its strategy of acquiring complementary businesses. It also follows a systematic divestiture plan to streamline its portfolio. Notably, it has acquired a private company — This is L. — that produces period products with natural ingredients. This will aid in expanding its naturals product range, which is a key focus area for most day-to-day consumer product companies at present.
Some other recent acquisitions include the beauty brand — First Aid Beauty, the consumer health business of Germany-based Merck KGaA and Walker & Company Brands, all in 2018. These acquisitions should bolster the company’s product portfolio in various categories. Simultaneously, it divested several assets over the years as part of the portfolio-reshaping plan.
Cost Saving and Productivity Program on Track
P&G remains focused on productivity and cost-saving plans to boost margins. The company’s continued investment in business, alongside efforts to offset macro cost headwinds and balance top and bottom-line growth, underscore its productivity efforts. With cost savings and efficiency improvements across all facets of business, the company has crossed the mid-point of the second five-year (fiscal 2017-2021) cost savings target of $10 billion.
The second five-year restructuring plan targets cutting costs in areas including supply chain and cost of goods sold (COGS), marketing and digitization and promotional spend effectiveness. This plan comprises $7 billion in COGS savings ($4.5 billion from raw and packaging materials, $1.5 billion in manufacturing savings and $1 billion from transportation/warehousing/other); $2 billion of marketing cost reductions; $1.5 billion of trade spending savings (10% efficiency); and $1–$2 billion of additional overhead reductions.
Upbeat View
These actions have been driving the company’s robust quarterly performances over the years. Driven by strong organic sales performance, management provided upbeat guidance for fiscal 2020. The company projects both all-in and organic sales growth of 3-4% in fiscal 2020. Moreover, it anticipates core EPS growth of 4-9% for fiscal 2020 from $4.52 in fiscal 2019. It expects commodities, foreign exchange, transportation and tariffs to modestly aid earnings growth in fiscal 2020.
We expect all aforementioned factors to continue bolstering the company’s performance, and help it remain in investors’ good books.
Other Key Picks
The Estee Lauder Companies Inc. (EL - Free Report) has a long-term earnings growth rate of 13% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Church & Dwight Co., Inc. (CHD - Free Report) has a long-term earnings growth rate of 8.7% and a Zacks Rank #2.
Colgate-Palmolive Company (CL - Free Report) , also a Zacks Rank #2 stock, has an expected long-term earnings growth rate of 5.5%.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks free >>