Reports Q3 2021 results on Tuesday, April 20, before the market opens
Expected Revenue: $ 17.97 billion
EPS Forecast: $ 1.19
As consumer packaged goods supplier Procter & Gamble (NYSE 🙂 reports its latest quarterly results tomorrow, ahead of the opening, investors will be fully focused on whether the reopening of the US economy could end the current, impressive growth period for the Company based in Cincinnati, Ohio. They were fueled by the loading of the consumer's pantry and the increased focus on hygiene during the pandemic and related lockdowns.
PG Weekly TTM
Cleaning supplies, along with items such as loungewear and packaged food, have been popular for months as the COVID-19 contamination forced people to stay at home. But as vaccine rollout accelerates in the US, it's not clear whether manufacturers can continue to benefit from the robust sales growth.
That uncertain outlook is perhaps the main reason P&G stock hasn't moved much this year, after impressive 2020 gains. The stock closed at $ 137.25 on Friday, down about 1% for the year. In the same period, it is up 11%.
Another factor that could pose some challenges for the staple consumer business is the rising price of materials, such as plastic and aluminum, and how they will absorb these inflationary pressures.
The, a measure of the prices companies receive for their goods and services, rose 1% in March, the Labor Department said this month. , industrial chemicals, diesel and plastic resins were big winners. The inflation measure ended the month of March up 4.2% from a year earlier, the largest gain in 12 months in a decade.
If history provides any indication, inflation actually increases the profitability of blue chip companies. Rising material costs usually foreshadow thicker profit margins, according to a Wall Street Journal report quoting Jonathan Golub, chief US stock strategist at Credit Suisse Group, who said:
“Higher input costs generally go hand in hand with broad economic growth, allowing companies to pass additional costs on at their own higher prices. Fixed costs, such as factory equipment, can also be spread over larger sales. "
The most recent P&G guidelines do not see that trend disappear too quickly. The maker of Charmin toilet paper, Tide laundry detergent and other household items said in January that it expected its organic revenues to grow by a whopping 6% in fiscal year 2021, up from the previous forecast of no more than 5% . P&G also sees core earnings per share rising by as much as 10%, from a range of 5% to 8%.
P&G management believes that some of these customs from the COVID-19 era will persist, which is a term lift for the company. "Health, hygiene, and consumers' focus on a clean home have changed forever," Chief Financial Officer Jon Moeller told Bloomberg in January.
"The demand may not remain at exactly the same level as it is now, but it is hard to imagine that, for example, hand cleaning and hand cleaning are returning to where they were before."
Bottom Line
The rate of growth that P&G has seen is not sustainable for a consumer packaged goods company. It wouldn't be fair to expect an eruption quarter every time from a giant like P&G.
That said, P&G stocks remain our preferred choice for long-term investors looking for income. It is one of the largest dividend payers in the US, paying out a quarterly dividend of $ 0.87 per share for a 2.53% return. We believe every weakness is a buying opportunity.
