What's In Store For Procter & Gamble (PG) In Q4 Earnings?
Zacks Investment Research | Jul 24, 2017 09:40PM ET
The Procter & Gamble Company (NYSE:PG) is set to report fourth-quarter fiscal 2017 results on Jul 27, before the market opens. Last quarter, it delivered a positive earnings surprise of 2.13%.
In fact, despite sales remaining subdued, the consumer goods company delivered a positive earnings surprise in each of the trailing four quarters, the average being 3.97%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Procter & Gamble has been struggling for the last few years to boost sales. Notably, the company’s sales declined in the last 13 consecutive quarters. Major foreign exchange headwind, weak volumes, divestitures and slowing market growth have been hurting the company’s sales. Soft consumer-spending environment in developed markets also adds to the worries.
The trend is not likely to change for the to-be-reported quarter. Softness in the U.S. and volatility in developing markets will likely have an adverse impact on Procter & Gamble’s results. In fact, categories in the company’s largest and profitable market, the U.S. (accounting for 40% of net sales), grew by less than a point in the fiscal third quarter, a lot lower than the roughly 2% growth registered in the first half of fiscal 2017. Overall, the company posted flat organic sales growth in developed markets.
Meanwhile, Procter & Gamble has been taking various restructuring initiatives aimed at generating higher profit and lowering costs. These initiatives have helped the company to accelerate margins growth amid the slowdown in sales. However, fiscal third quarter’s gross as well as operating margins fell despite benefitting from productivity savings. This was due to higher input costs, a planned increase in marketing spending, higher R&D costs, and lower pricing due to increased competition.
Hence, lower sales accompanied by higher commodity costs, more investments for marketing and increased R&D spending to push demand might adversely affect margins, thereby putting pressure on bottom line in the to-be-reported quarter. This will be partly offset by cost-saving measures.
For the fiscal fourth quarter, the Zacks Consensus Estimate for earnings is pegged at 78 cents, reflecting a decrease of 0.8% year over year. Meanwhile, the consensus estimate for revenues is pegged at $15.98 billion, implying a 0.8% decline.
Earnings Whispers
Our proven model does not conclusively show that Procter & Gamble is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Zacks Investment Research
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