Investing.com - Procter & Gamble extended its run of improved profitability and raised its outlook for the full year on Thursday, announcing core earnings per share for the second quarter of its fiscal year around 3.5% ahead of expectations, even though revenue growth fell short of forecasts.
Organic sales, adjusted for foreign exchange swings, rose 5% on the year, with an 8% rise in beauty products and a 7% rise in health care products leading the way. Core operating margins, another key metric for the consumer products giant, rose 1.9% percentage point from a year earlier, adjusted for foreign exchange factors.
The company now expects organic sales to grow by between 4% and 5% in the 2020 fiscal year, the midpoint of which is 0.5% higher than the earlier 3%-5% range. It also raised its forecast for full-year EPS to a range of 8%-11%. The 9.5% midpoint compares with a previous one of 7.5% (in a range of 5%-10%).
However, it was the revenue shortfall that the market focused on in immediate reaction. The shares fell 2.2% in premarket trading in New York.
Over the past two years, P&G has consistently grown sales, helped by a simplified organizational structure. Under Chief Executive Officer David Taylor, Cincinnati-based P&G has cut its roster of brands from 175 to 65, focusing on the 10 product categories where the margin is highest.
“These measures are clearly helping the company to seek higher prices for its products despite a very benign inflationary environment," said Investing.com analyst Haris Anwar. "P&G started implementing phased price increases last summer after failing to revive growth by doing the opposite.”
Procter & Gamble stock is up 1.1% for the year to date and closed Wednesday trading at $126.31, just below its 52-week high of $127.00 set on January 17.
“What’s fuelled the stock’s surge to a record high is the company’s success in its turnaround strategy to cope with changing consumer needs as well as its ability to put itself way ahead of competitors," Anwar added.
P&G announced core earnings per share of $1.42 on revenue of $18.24 billion. Analysts polled by Investing.com anticipated EPS of $1.37 on revenue of $18.41 billion.
That represents a 14% improvement in EPS from a year earlier. Analysts are expecting EPS of $1.11 and revenue of $16.98 billion in the next quarter.
Procter & Gamble follows other major Consumer/Non-Cyclical sector earnings this month
Procter & Gamble's report follows an earnings beat by Constellation Brands B on January 8, who reported EPS of $2.14 on revenue of $2B, was in comparison with forecasts EPS of $1.82 on revenue of $1.95B.
Constellation Brands A had beat expectations on January 8 with third quarter EPS of $2.14 on revenue of $2B, was in comparison to anticipated for EPS of $1.82 on revenue of $1.95B.
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