Analysts Like Procter And Gamble Sales Numbers, Dislike Margins

Procter and Gamble Co PG stock was down Thursday but analysts reactions were mixed after an earnings report that saw better-than expected sales growth offset by disappointing margins.

The Analysts

Raymond James analyst Joseph Altobello maintained a Market Perform rating on Procter and Gamble. 

Macquarie Research analyst Caroline Levy reiterated an Outperform rating with a $100 price target.

Wells Fargo analyst Bonnie Herzog maintained a Market Perform rating and lifted the price target $88 to $91.

Key Takeaways

Core earnings per share of $1.25 were up 5 percent year-over-year and beat the Street consensus estimate of $1.21. That was driven by stronger-than-predicted sales growth of more than 4 percent, led by strong growth in beauty products, which were up 8 percent.

Raymond James’ Altobello said organic sales were higher in eight of 10 categories and in all 15 of P&G’s largest markets.

China saw particularly strong growth, with sales up 15 percent, offsetting a slight slowing of growth in the United States, the analyst said. Also of note to Altobello: many of P&G’s fastest-growing brands are premium-priced.

Macquarie's Levy said she's optimistic about the beauty and fabric segments, as they continue to generate "robust" organic sales growth and are lapping "tough" year-ago comparisons. 

But while sales growth was encouraging, margins weren’t, thanks to higher transportation and other input costs.

“While recent results have left us incrementally more positive, we are still hesitant to get more bullish on the name given the highly uncertain pricing, currency, and commodity environments the company faces,” said Raymond James' Altobello.

Procter and Gamble shares were down 0.6 percent at $94.30 at the close Thursday. 

Related Links:

4 Reasons Why Bank Of America Added Procter & Gamble To Its US1 Lists

Procter & Gamble Is Now A Top Pick At Morgan Stanley

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