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Should Investors Avoid Procter & Gamble (PG) Ahead of Earnings?

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Shares of Procter & Gamble (PG - Free Report) are down roughly 13% over the last year as the consumer packaged goods giant faces tougher competition from rivals and upstarts. With that said, earnings season could give Procter & Gamble a much needed shot in the arm, if it impresses investors.

One proven way for investors to benefit during earnings season is to find companies that are set to outperform earnings expectations. This tactic becomes even more important amid volatile market conditions.

In the case of Procter & Gamble, the company saw its organic sales lose steam earlier this fiscal year. However, Procter & Gamble raised its fiscal 2018 earnings outlook last quarter.

Now, as investors look to use quarterly earnings season to recoup from a rough couple of months, they need to understand how Procter & Gamble is actually expected to perform this quarter in order to see if a turnaround might be in store.

Outlook

Procter & Gamble’s quarterly revenues are projected to climb 3.5% to reach $16.16 billion, based on our current Zacks Consensus Estimates. Meanwhile, the CPG power is projected to see its earnings reach $0.98 per share, which would mark 2.1% growth from the year-ago period.  

Cleary, Procter & Gamble is projected to report some growth this quarter, but on their own, these top and bottom line estimates don’t give investors nearly enough information.

Investors need to know if Procter & Gamble is expected to top our earnings estimate. Luckily, Zacks Premium customers can utilize the Earnings ESP Screener in order to search for stocks that are expected to surprise.

This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

In contrast, a stock with a Zacks Rank #3 (Hold) or worse, coupled with a negative Earnings ESP, is one that we typically want to avoid during earnings season.

Procter & Gamble is currently a Zacks Rank #4 (Sell) and sports an Earnings ESP of -0.58%. The company has also experienced three downward earnings estimate revisions within the last seven days. Therefore, investors should consider Procter & Gamble a stock that could very well fall short of earnings estimates, and in turn, see its stock price continue to sink.

Procter & Gamble is expected to report its upcoming quarterly financial results before the market opens on Friday, April 20, just a few days before fellow CPG giant Kimberly-Clark (KMB - Free Report) .

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