Procter & Gamble (PG) Q3 Earnings Top Estimates, View Raised

The Procter & Gamble Company (NYSE:PG) , popularly known as P&G, reported third-quarter fiscal 2018 financial results, wherein both earnings and revenues surpassed expectations, benefiting from higher demand for skincare products, along with fabric and home care products. The company has also lifted its core earnings per share guidance.

P&G’s fiscal third-quarter core earnings of $1.00 per share beat the Zacks Consensus Estimate of 98 cents by 2%. The bottom line increased 4% from the prior-year quarter. Currency-neutral core earnings per share (EPS) also improved 1%. The upside was primarily driven by increased net sales and a lower core effective tax rate.

Meanwhile, P&G agreed to acquire the consumer-health business of Germany-based Merck (NYSE:MRK) KGaA for approximately 3.4 billion euro ($4 billion). Per the terms, P&G will also acquire 51.8% stake in India-listed Merck Ltd. The deal is expected to close during the 2018/19 fiscal. The addition of Merck KGaA’s differentiated as well as physician-supported brands will enhance P&G's existing consumer healthcare capabilities, and brands such as Vicks, Pepto-Bismol and Oral-B. The buyout is expected to boost the company’s brand portfolio and category footprint. It will also expand P&G’s geographic footprint, as Merck KGaA’s consumer health business is active in 44 countries and includes more than 900 products.

Sales in Details

P&G’s reported net sales of $16.3 billion surpassed the Zacks Consensus Estimate of $16.2 billion. The top line grew 4% from the year-ago level, given strong sales from its beauty, and fabric and homecare businesses. Foreign exchange had a 4% positive impact on sales.

Organically (excluding the impact of acquisitions, divestitures and foreign exchange), revenues grew 1% (versus 2% growth seen in the preceding quarter) on the back of 2% increase in organic volumes. However, price had a 2% negative impact on sales.

Of the five business segments, three registered positive organic sales growth. Beauty, Health Care, and Fabric & Home Care segments registered organic sales growth of 5%, 1% and 3%, respectively, in the quarter. Grooming and Baby, Feminine & Family Care segments, on the other hand, registered 3% organic sales decline each.

Net sales of the Beauty, Fabric & Home Care, Health Care and Grooming segments grew 10%, 6%, 5% and 2%, respectively. However, Baby, Feminine & Family Care segment’s sales remained flat in the quarter.

Procter & Gamble Company (The) Price, Consensus and EPS Surprise

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Written By: Zacks Investment Research