P&G Appoints New Board of Director

Consumer giant The Procter & Gamble Company ( PG - Analyst Report ) recently announced the appointment of Terry Lundgren to its board of directors. Terry Lundgren previously served as the chief executive officer (CEO) of departmental store chain Macy’s, Inc ( M - Analyst Report ) .

Lundgren, aged 60, is set to replace P&G’s current director Johnathan Rodgers who will retire in October this year and decided against contesting for the election scheduled in the same month. In addition to being a CEO, Lundgren was also the chairman and president of Macy’s. Lundgren will be a member of the Governance & Public Responsibility and Innovation & Technology committees of the board.

Rodgers, aged 66, was a member of the same committee and has been a director of P&G since 2011, being one of the longest-serving directors of the company. He will continue to serve the company till October.

Our Recommendation

P&G carries a Zacks Rank #3 (short-term Hold) Over the long term, the company has a Neutral recommendation.

P&G’s first quarter earnings were significantly better than the Zacks Consensus Estimate and also improved on a year-over-year basis, driven by organic sales growth, lower commodity cost headwinds and improved productivity. Though net sales declined, they were at the favorable end of management expectations.

Slowdown in developed nations and commodity cost increases resulted in a series of disappointing earnings results and guidance cuts for P&G. However, the fourth quarter 2012 and first quarter 2013 results were much better than past quarters. Overall, we are encouraged by P&G’s strong brand recognition, diversified portfolio, rapid growth in developing nations, impressive product development capabilities and marketing prowess.

Fiscal 2012 had been a tough year for P&G, but the company has laid out plans to improve results in developed markets while maintaining momentum in the developing nations. Moreover, the company will increase focus on the most profitable business and on its biggest innovations, and further accelerate cost savings. We would prefer to wait and see if the plan is effectively executed.