* Reports Fourth Quarter 2020 Results Before Market Opens Wednesday January 20
* Expected Revenue: $ 19.18 Billion
* EPS Expectation: $ 1.5
Procter & Gamble (NYSE 🙂 is one of those global brands thriving in the COVID-19 pandemic. The maker of Tide laundry detergent and Charmin toilet paper recorded the best sales growth in recent years amid a boom in the home use of cleaning products.
When the global consumer staples giant announces its last earnings Wednesday, investors will be keen to see this trend continue. With the second wave of coronavirus at its peak, there are indications that consumers are sticking to their pantry loading habits by purchasing items such as sanitizers, packaged food, and toilet paper.
P&G is again expected to report in sales that should show growth of more than 5% in the quarter ended December 31. Earnings per share are expected to rise to $ 1.5 from $ 1.42 in the same period a year ago.
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This robust performance has helped PG stock rebound sharply from the March dip, providing investors with the stable gains they expect from consumer stocks in safe havens. But that rally is showing some signs of a spike with its share down about 6% in the last three months. It closed at $ 134.78 on Friday, after up 44% from its dip in March.
Procter & Gamble Weekly Chart.
Over the past three years, P&G – whose other brands include many household names such as Dawn dish soap, Crest toothpaste, and Gillette razors – has consistently boosted sales, aided by its innovation, marketing and simplified organizational structure.
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High ratings?
With this impressive string of quarterly sales, one of the concerns is how long a consumer company can deliver above average performance?
These concerns have led some investors to question P & G's high valuations and its potential to rise further after such a fast and powerful rally in 2020. Today, P&G is trading at 26 times expected earnings, well above 10-year average of 19.3 times and the highest multiple since the late 1990s, according to FactSet.
Cincinnati-based P&G management believes that some of these COVID-19-era customs will persist, driving the business over the long term.
As Jon Moeller, P & G's Chief Financial Officer, said in an October conference call with analysts:
“We do expect there to be a certain tenacity to new habits that are being formed. It's hard for us to see in our interactions with consumers that we will strike back and return to the same attitudes and behaviors that we collectively had before COVID. "
Another positive development for P&G is that after a few dull quarters sales in the care segment are also returning. In the third quarter, sales of these products grew the most since 2016, supported by increased demand for shaving and styling products and higher prices. According to Moeller, new launches under the Gillette brand that focus on beard maintenance and sensitive skin treatments have allowed the company to keep men engaged even when they're not shaving.
Bottom Line
The rate of growth shown by P&G is unusual for a company that produces everyday consumables in categories where competition is strong and margins are low. It wouldn't be fair to expect a burst quarter every time from a major consumer in staples like P&G.
That said, P&G stock remains our preferred choice among the consumer packaged goods companies. It is one of the largest dividend payers in the US – it pays out a quarterly dividend of $ 0.79 per share for a 2.3% return – with a track record that is hard to match.
