Case Study: What Credible analysts are saying on Procter & Gamble (PG) stock
Key Points
Performance
Procter & Gamble (PG) shares fell by 5.69% this week. On a year-to-date basis, PG's shares are now down by 5.67%. This compares poorly to the S&P 500, which is up by 3.88% during 2023 thus far.
Event & Impact
Procter & Gamble announced fiscal 2023 Q2 earnings results this week, beating Wall Street’s estimates on the top line and meeting expectations on the bottom-line. PG posted $20.8 billion in revenue, which was down by 0.7% on a year-over-year basis, beating estimates by $50 million. The company posted non-GAAP earnings per share of $1.59.
Noteworthy News:
Procter & Gamble increased its full-year 2023 guidance due to bullish data coming out of China.
Nobias Insights
66% of recent articles published by credible authors focused on Procter & Gamble shares offer a “bullish” bias. 2 out of the three credible Wall Street analysts who cover PG offer a “bullish” outlook. The average price target being applied to PG by these credible analysts is $157.00, which implies upside potential of approximately 9.8% relative to the stock’s current share price of $142.97.
Bullish Take Robert Abbott, a Nobias 4-star rated author, said, “Procter & Gamble has been profitable for all 10 years of the past decade. That reflects its industry-leading operating and net margins of 22.03% and 18.11% respectively.”
Bearish Take Shawn Johnson, a Nobias 4-star rated author, said, “At a roughly 15% premium compared to the 3% discount to the average consumer defensive sector, the consumer goods company is still one of the more highly valued stocks in the sector”
PG Jan 2023
Consumer staple giant, Procter and Gamble (PG), announced its fiscal 2023 second quarter earnings results this week. The $347 billion company posted sales which beat Wall Street’s expectations and earnings-per-share which was in-line with consensus estimates coming into the quarter.
Yet, even with this top-line beat in mind, PG shares slumped by 5.69% this week. The company’s shares are now down by 5.67% on a year-to-date basis, underperforming the broader market by a wide margin (the S&P 500 is up by 3.88% during 2023 thus far).
Bullish Nobias Credible Analysts Opinions:
Credible authors and analysts remain bullish on shares, however. With P&G’s 2.56% dividend yield in mind, the average price target being applied to PG right now imply double digit total returns moving forward. Robert Abbott, a Nobias 4-star rated author, examined Proctor and Gamble’s business model in a recent report that he published at GuruFocus.
Abbott said, “Founded in 1837 in Cincinnati, Ohio, where it is still headquartered, the consumer products company has a market cap of $359.17 billion and had trailing 12-month revenue of $80.461 billion.”
Regarding the company’s brand portfolio, he wrote, “The company noted in its 10-K for fiscal year 2022 (which ended on June 30) that it has a portfolio of leading brands, 20 of which generate more than $1 billion dollars a year in global sales, such as Tide, Charmin, Pantene and Pampers.” “International sales accounted for about 55% of consolidated sales in fiscal 2022,” Abbott noted.
Looking at the company’s balance sheet, Abbott said, “Its interest coverage ratio is 39.14, which tells us the company generates $39.14 in operating income for every dollar of interest expense. Its hard to imagine the firm getting into trouble because it could not pay the interest on its debt.”
Looking at the company’s profitability metrics, he stated, “Procter & Gamble has been profitable for all 10 years of the past decade. That reflects its industry-leading operating and net margins of 22.03% and 18.11% respectively.”
Abbott noted that these reliable bottom-line results have translated directly into predictable shareholder returns. He said, “At 2.35%, the Procter & Gamble dividend yield is higher than the latest average for S&P 500 companies, though that's not saying much. But, the most important characteristic of its dividend situation is its status as a Dividend King. Having raised its dividend for 66 consecutive years, it is well above the Dividend King minimum of 50 years.”
Putting this into perspective, Abbott stated, “Only 41 of the many thousands of publicly traded stocks have reached this elite level.” Furthermore, he also mentioned that PG returns cash to shareholders in the form of stock buybacks as well. He said, “It also has bought back its own shares quite consistently over the past decade, reducing the number of shares outstanding by an average of 1.66% per year.”
Bearish Nobias Credible Analysts Opinions:
Shawn Johnson, a Nobias 4-star rated author, covered P&G’s fiscal 2023 Q2 results in an article published this week titled, “Procter & Gamble Shows Resilience But the Stock Is Overvalued”. Johnson highlighted the persistent reliability of Procter and Gamble, stating, “The results were largely in line with market expectations. Revenue fell about 1% year over year to $20.77 billion, which slightly missed FactSet’s consensus estimates of $20.75 billion. Earnings per share met expectations of $1.59.”
Johnson highlighted the company’s Q2 data, writing:
Revenue: $20.77 billion versus the FactSet average estimate of $20.75 billion.
Earnings per share: $1.59 versus average estimates of $1.59.
Guidance for organic sales growth increased to 4%-5% from 3%-4% on expectations of a recovery in the Greater China market.
Headwinds from unfavorable currency exchange rates and inflation have eased slightly with the firm forecasting a 5% decline in the after-effects.
Despite PG’s ability to meet Wall Street’s expectations, Johnson notes that the company’s stock appears to be expensive. He said, “At a roughly 15% premium compared to the 3% discount to the average consumer defensive sector, the consumer goods company is still one of the more highly valued stocks in the sector”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Overall, Johnson concluded, “Procter & Gamble’s PG fiscal second-quarter 2023 earnings showed the consumer goods giant is weathering macroeconomic and competitive headwinds well, but the stock is trading above Morningstar’s fair value estimates, meaning is [sic] that investors should keep their powder dry.”
Despite Johnson’s valuation concerns, 66% of recent articles published by credible authors that focused on PG stock expressed a “bullish” bias towards shares.
Overall bias of Nobias Credible Analysts and Bloggers:
Furthermore, 2 out of the 3 credible Wall Street analysts that Nobias tracks which have offered an opinion on Procter and Gamble believe that the company’s shares are likely to head higher.
Currently, the average price target being applied to P&G by credible Wall Street analysts is $157.00. Relative to PG’s current share price of $142.97 that represents upside potential of approximately 9.8%.
Disclosure: As of 1/21/2023, Nicholas Ward had no PG position. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.