We have maintained our Neutral rating on The Procter & Gamble Company ( PG - Analyst Report ) following appraisal of the third quarter 2012 results.

P&G’s adjusted earnings of 94 cents per share in the third quarter beat the Zacks Consensus Estimate by a penny. However, earnings were flat from prior-year levels as benefits from top-line growth and cost savings were offset by rising commodity costs. P&G’s net sales increased 2% to $20.2 billion. Organically, revenues were up 3% driven primarily by pricing. However, margins declined due to high commodity costs.

Moreover, the company cut its earnings outlook for fiscal 2012 due to Venezuela price regulations, rising input costs and economic uncertainty in Western Europe and U.S.

Slowdown in the developed nations and commodity cost increases create persistent overhangs. Moreover, P&G is seeing business disruption and substantial price reductions in Venezuela following the publication of new price control regulations in the country. Accordingly, retailers delayed orders in the third quarter of fiscal 2012 which hurt the company’s top line by 0.5%. Despite these near-term challenges, we are more confident of the company’s long-term prospects.

P&G’s products enjoy strong brand recognition and are sold in more than 180 countries around the world. P&G’s 50 Leadership Brands are some of the world’s most commonly used household names, representing around 90% of the company’s sales and profits. These 50 brands include 26 power brands each generating over $1 billion in revenues. Moreover, P&G is known for its impressive product development capabilities and marketing prowess. P&G has consistently increased market share in fast growing businesses over the years through innovation and new product launches. The company’s drive for innovation and marketing strategies allow it to expand in more categories, geographies and channels, thus boosting top- and bottom-line growth.

Further, the company focuses on improving its product portfolio through strategic initiatives which enable it to pay more attention to its profitable businesses. Very recently the company completed the divestiture of its snacks unit, Pringles, to Kellogg Company ( K - Analyst Report ) to re-focus on beauty and personal care products.

The company is increasing its presence in the fast growing developing markets as the developed nations witness volume declines due to market saturation, low disposable incomes of consumers and competitive activity. The company is working on this strategy by focusing on affordability, accessibility and brand awareness. The company’s volume and market share growth trends in these developing markets have been encouraging. Developing markets constituted about 35% of global sales of the company in fiscal 2011. Management believes that their contribution to global sales will reach about 37% of sales and about 45% of volume by the end of fiscal 2012.

Other than these, the company’s solid cash flow generation capabilities and its cost savings and productivity improvement allow for investment in product innovations, acquisitions, and brand development.