November 9, 2023, $150.34
Business Overview:
- Established in 1837, P&G is a global consumer product company with beauty, grooming, healthcare, fabric and home care, and family care segments. Notable brands include Pantene, Gillette, Crest, Tide, and Pampers.
- They reported strong performance in 1QFY24 and in fiscal year 2023 across multiple quarters.
Maverick Guidance:
- Short-term stock buy/sell recommendation: ACCUMULATE ON SHORT-TERM WEAKNESS
- Long-term stock buy/sell recommendation: ACCUMULATE
- The superior Consumer Staples company.
- 10-year Average Annual Total Return through November 8, 2023: +9.31% (2nd quartile.)
Consideration for Maverick Portfolio:
- PG is considered appropriate for any Maverick portfolio, from CAUTIOUS GROWTH for Conservative investors to AGGRESSIVE GROWTH for investors who are open to significant risk for the potential of maximum returns.
Market Guidance:
- Consensus Analyst Ratings— MarketBeat = Moderate Buy, TipRanks = Moderate Buy.
- 21 Wall Street analysts have offered 12-month price targets for PG in the last 3 months. There are 13 Buy, 8 Hold, and zero Sell. (from TipRanks)
- Based on 21 Wall Street analysts offering 12-month price targets for Procter & Gamble in the last 3 months.
- The average price target is $163.44with a high forecast of $179.00 and a low forecast of $139.00. The average price target represents an 8.7% change from the last price of $150.34. (from TipRanks)
- Dividend Yield: $0.94 per share paid quarterly to yield 2.5%. Dividend growth for 15 years. (from TipRanks)
- Technical Analysis:
- Investing.com = Daily: BUY and Weekly: NEUTRAL
- TipRanks = Daily: BUY and Weekly: STRONG BUY
Value Line Guidance: (all data from VL)
- Company Financial Strength Rating: A++
Share Price Safety, Market Timing, Technical Rank: 1=best. 5=worst
- Share Price Safety: 1 of 5
- Market Timing: 3 of 5
- Technical Rank: 3 of 5
- Beta: 0.70
- Stock’s Price Stability: 100/100
- Price Growth Persistence: 55/100
- Earnings Predictability: 100/100
- Revenue Growth Potential: 4.5%
- Cash Flow Growth Potential: 5.0%
- Earnings Growth Potential: 6.0%
- Projected Average Annual PE: 20
- Average Annual Revenue Growth in the past 5 years: 5.5%
- Average Annual Revenue Growth for the next 5 years: 4.5%
- Average Annual Cash Flow Growth in the past 5 years: 6.5%
- Average Annual Cash Flow Growth for the next 5 years: 5.0%
- Average Annual Earnings Growth in the past 5 years: 8.0%
- Average Annual Earnings Growth for the next 5 years: 6.0%
- Average Annual Dividend Growth in the past 5 years: 5.0%
- Average Annual Dividend Growth for the next 5 years: 4.0%
- Projected Average Annual Dividend Yield 3 to 5 years: 2.7%
Revenue, Cash Flow, Earnings Quarterly Operations Review:
September 2023 Q1FY24 (Reported Oct. 18)
- Net sales for the first quarter of fiscal year 2024 were $21.9 billion, indicating a 6% increase from the previous year.
- Organic sales, excluding foreign exchange and acquisitions/divestitures impacts, grew by 7%.
- Diluted net earnings per share rose to $1.83, marking a 17% increase.
- Operating cash flow amounted to $4.9 billion, and net earnings were $4.6 billion for the quarter.
- P&G allocated $3.8 billion to shareholders through dividends and stock repurchases.
- Their guidance for fiscal 2024 includes a projected sales growth of 2-4% and organic sales growth of 4-5%.
- They expect an adjusted diluted net earnings per share growth of 6-9%.
- The company anticipates an effective tax rate of 21% for the fiscal year.
- P&G plans to invest in capital spending to support its business operations.
June 2023 (Q4):
- Sales and earnings increased by 5% and 13%, respectively, year over year.
- Organic sales (excluding currency effects and portfolio changes) advanced by 8% during the quarter.
- Management’s efforts and pricing initiatives contributed to the positive results.
- P&G will likely face challenges like inflation, operating costs, and consumer spending cutbacks in some categories in the coming quarters.
- Sales are expected to advance by around 3% in the following year, and core earnings per share should increase by 5-10%.
- P&G plans to allocate 5% of sales to its fiscal 2024 capital budget, focusing on product innovation and brand equity.
- While the stock has recovered, its capital appreciation potential is limited in the next few years.
- Nevertheless, it remains an appealing choice for conservative investors due to its defensive nature and attractive dividend yield.
- March 2023 (Q3):
- P&G reported better-than-expected results, with a 3% increase in earnings per share and a 4% rise in sales.
- Organic sales increased by 7%, and currency-neutral profits grew by 13%.
- The company made modest progress despite cost and operating challenges, supported by strategic improvements, price hikes, and a better product mix.
- P&G is expected to achieve low single-digit growth in sales and profits through fiscal 2024.
- Management’s focus on productivity improvements, cost controls, and price hikes should bolster long-term prospects.
December 2022 (Q2):
- P&G faced challenges from inflation and rising operating costs, leading to reduced sales volume.
- The strength of the U.S. dollar eroded overseas market results.
- Core earnings declined by 4% year-over-year, and revenue declined by 1%.
- However, P&G relied on pricing initiatives to mitigate negative impacts, boost sales, and offset higher business expenses.
- Sales and profits increased by 5% during the quarter, excluding negative foreign currency effects.
- The company was expected to post flat-to-down comparisons for fiscal 2023, with cost pressures and currency headwinds.
- Management’s efforts, including productivity improvements and cost controls, were anticipated to take hold in the latter part of the year.
- Despite the recent stock price recovery, the potential for capital appreciation was limited over the coming years.
- Nevertheless, P&G remained an attractive option for conservative investors due to its defensive nature, and it offered an above-average dividend yield.
Operations 3-to-5-year Outlook (Revenue, Cash Flow, Earnings)
- The 3-to-5-year outlook indicates continued growth in revenue and earnings.
- The company’s long-run outlook is optimistic.
Financial Performance
- 10-year Average Annual Total Return through November 8, 2023: +9.31% (2nd quartile.)
- EPS
- FY2020: $5.12
- FY2021: $5.66
- FY 2022: $5.81
- FY 2023: $5.90
- FY2024: e$6.35 (from Value Line Quarterly Report)
- Current PE: 24.4 (FinViz)
- Forward PE: 21.7 (FinViz)
- PEG Ratio: 3.12 (FinViz)
Internal Strength/Weakness
Strengths:
- Diverse, strong brand portfolio (e.g., Pampers, Tide, Gillette).
- Extensive global presence and distribution network.
- Significant investment in research and development.
- Effective marketing and advertising expertise.
- Wide range of product offerings.
- Consistent strong financial performance.
- Commitment to sustainability and corporate responsibility.
- Skilled, diverse workforce fostering innovation.
Weaknesses:
- Reliance on mature markets prone to economic slowdowns.
- Intense competition from major consumer goods companies.
- Risk of brand dilution with a vast brand portfolio.
- Vulnerability to supply chain disruptions globally.
- Limited presence in specific niche markets.
- Exposure to regulatory and compliance risks.
- Potential slow response to changing consumer preferences.
- Negative impacts from cost-cutting measures on long-term competitiveness.
Top of Form
External Opportunities/Threats
Opportunities:
- Reliance on mature markets’ economic fluctuations.
- Fierce competition from major rivals.
- Brand dilution risk due to numerous brands.
- Vulnerability to global supply chain disruptions.
- Limited presence in niche markets.
- Regulatory and compliance exposure.
- Slow response to evolving consumer preferences.
- Potential long-term competitiveness issues from cost-cutting.
Threats:
- Fierce competition from major and local players.
- Risk from evolving consumer preferences.
- Vulnerability to economic fluctuations.
- Exposure to regulatory complexities.
- Susceptibility to supply chain disruptions.
- Threats from counterfeit products and brand infringement.
- Pressure from rising raw material and labor costs.
- The necessity for constant technological adaptation.
- Need to meet environmental and social expectations.
- Risk of losing key personnel’s expertise.
FinViz Snapshot: https://finviz.com/screener.ashx?v=341&p=m&t=PG
10-Year Historical Price Chart:
Point & Figure Chart: (from StockCharts.com)
https://stockcharts.com/freecharts/pnf.php?c=PG,PWTADANRNO[PA][D][F1!3!!!2!20]
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