Bloomberg News

P&G Raises 2013 Profit Forecast Amid Pressure From Ackman

January 25, 2013

Procter & Gamble Co. Chief Executive Officer Bob McDonald

Chief Executive Officer Bob McDonald is reducing expenses by cutting jobs and consolidating local suppliers while also putting more emphasis on leading brands as P&G works to regain market share. Photographer: Andrew Harrer/Bloomberg

Procter & Gamble Co. (PG:US), whose chief executive officer is under pressure from activist investor Bill Ackman, raised its 2013 profit forecast after gaining market share in key categories such as U.S. detergents.

The shares rose to the highest price in more than five years after P&G boosted and narrowed its annual forecast for profit excluding some items to a range of $3.97 to $4.07 a share from $3.80 to $4. Analysts predicted (PG:US) $3.98, on average. P&G also posted second-quarter profit that beat analysts’ estimates.

P&G gained market share with new products such as Tide Pods as CEO Bob McDonald works to boost profit results by reducing expenses, cutting jobs and consolidating local suppliers. McDonald disappointed investors in 2012 when he lowered profit forecasts three times. Ackman, whose stake in P&G is valued at about $2 billion, has pushed to replace him.

“There are signs that the company is improving -- slowly - - but that momentum needs to continue going forward for discontent to evaporate,” Ali Dibadj, an analyst at Sanford C. Bernstein & Co., said in an e-mail. “It’s been a long period of underperformance.”

Dibadj, based in New York, rates the shares outperform, the equivalent of a buy.

P&G, the world’s largest consumer products maker, rose 4 percent to $73.25 at the close in New York, the highest price since December 2007. The shares gained 1.8 percent last year (PG:US) compared with a 13 percent gain for the Standard & Poor’s 500 Index.

Restructuring Costs

Net income in the second quarter ended Dec. 31 more than doubled to $4.06 billion, or $1.39 a share, from $1.69 billion, or 57 cents, a year earlier, Cincinnati-based P&G said today in a statement. Excluding some items, profit of $1.22 a share topped the $1.11 average of estimates (PG:US) compiled by Bloomberg.

The results included restructuring costs and a gain on the purchase of the balance of P&G’s Baby Care and Feminine Care joint venture in Iberia.

Net sales (PG:US) rose 2 percent to $22.2 billion, topping the $21.9 billion average of analysts’ estimates.

“The business is growing strongly in developing markets and developed markets alike,” McDonald said during a media conference call this morning.

In the U.S., P&G saw market-share gains in laundry and dish detergent, blades and razors, and oral care, McDonald said. P&G gained or held market share in categories accounting for almost 50 percent of sales globally, the company said.

Market Share

The 50 percent gain or hold in market share is up from 45 percent in the first quarter and 30 percent in the fourth quarter, Chief Financial Officer Jon Moeller said on a conference call today.

The tone of today’s conference call was different than in April, when analysts accused executives of making excuses for poor performance.

“Each and every quarter that you get like this is going to help investors and analysts forget about the last couple of years,” said Jack Russo, an analyst at Edward Jones & Co. in St. Louis. “It’s still early, but hopefully they can keep this rolling.” He recommends buying the shares.

Even Ackman, who told CNN in an interview last week that he thought McDonald was not likely the best person for the job, applauded the results.

“If Bob can turn this thing around, he deserves enormous credit and he’ll be the right guy,” Ackman said on CNBC today. “Based on the last three years at PG, it really certainly looked like that Bob is not the right guy for the company, but if the company can make dramatic progress, and I think this quarter is an indication of very significant progress, then I hope that Bob can be successful and can make it.”

Kimberly-Clark Corp. (KMB:US), the maker of Kleenex tissue and Huggies diapers, also reported fourth-quarter profit that beat analysts’ estimates, helped by sales in its personal care unit. Excluding some items, profit at the Dallas-based company totaled $1.37 a share. Analysts projected $1.36.

Kimberly-Clark fell 0.4 percent to $86.26 in New York. The shares rose 15 percent last year compared with a 7.5 percent gain for the Standard & Poor’s 500 Consumer Staples Index.

To contact the reporter on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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Companies Mentioned

  • PG
    (Procter & Gamble Co/The)
    • $79.56 USD
    • -0.70
    • -0.88%
  • KMB
    (Kimberly-Clark Corp)
    • $108.53 USD
    • -0.96
    • -0.88%
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