Australia markets closed

Will Procter & Gamble's Solid Run Continue in the New Year?

Zacks Equity Research

The Procter & Gamble Company PG, popularly known as P&G, looks well poised to maintain this year's vigor going into the New Year, courtesy of sound fundamentals and growth efforts. We note that shares of this Cincinnati, OH-based company have advanced 36.3% year to date compared with the industry’s growth of 24.8%. This Zacks Rank #2 (Buy) stock has also comfortably outperformed the Consumer Staples sector and the S&P 500 Index that rallied 19% and 26%, respectively.

Clearly, the stock has been benefiting from ongoing initiatives to improve productivity. The company is focused on product improvement as well as packaging and marketing initiatives. Also, it is on track with its cost-saving plans.



Strategic Endeavors to Drive Growth

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-line and bottom-line growth, underscore its productivity efforts. With cost savings and efficiency improvements across all facets of business, it 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, digitization and promotional spend effectiveness.

Further, continuous rise in shipment volume, favorable mix and pricing has been aiding the company’s organic sales. Additionally, organic sales gain across all segments highlight the strength of its portfolio, which is likely to bolster top and bottom lines. Persistent top-line growth, margin expansion and cash productivity should continue to aid the company’s results in the year ahead.

For fiscal 2020, the company projects all-in sales growth of 3-5% compared with 3-4% mentioned earlier. Moreover, it now expects core EPS growth of 5-10% for fiscal 2020 compared with 4-9% mentioned earlier. In fiscal 2019, the company reported core earnings of $4.52 per share.

The company focuses on improving its product portfolio through initiatives, which enable it to concentrate on its fast-growing businesses. For this, it relies on the strategy of acquiring complementary businesses. It also follows a systematic divestiture plan to streamline its portfolio. Notably, it has acquired This is L., a private company that produces period products with natural ingredients. This will aid in expanding its natural products range, which is a key focus area for most day-to-day consumer product companies at present.

Wrapping Up

Clearly, you can see from above that there are plenty of reasons to be optimistic about the stock.  The Zacks Consensus Estimate for Procter & Gamble’s top line and bottom line for fiscal 2020 indicates year-over-year improvement of 4.1% and 9.3%, respectively. Additionally, the company’s long-term earnings growth rate of 7.5% and Growth Score of B reflect its inherent strength.

3 More Stocks to Consider

Boston Beer SAM, with a Zacks Rank #2, has a long-term earnings per share growth rate of 10%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Landec Corporation LNDC has a long-term earnings growth rate of 10% and a Zacks Rank #2.

Beyond Meat, Inc. BYND, with a Zacks Rank #2, delivered positive earnings surprise of 20% in the last reported quarter.

7 Best Stocks for the Next 30 Days

Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers “Most Likely for Early Price Pops.”

Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.6% per year. So be sure to give these hand-picked 7 your immediate attention.

See 7 handpicked stocks now >>