Procter & Gamble Earnings Preview: Fiscal Third Quarter 2009

Procter & Gamble [[PG]] is scheduled to report their fiscal third quarter 2009 results before the market opens on Thursday, April 30. Based on our analysis, we at are expecting PG to report better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $19.00 billion and EPS of $.81. This would represent a 6% decrease in pro forma revenues from last year’s $20.03 billion in the same period. The current analyst consensus estimates calls for revenues of $18.88 billion and $.80 EPS. On January 30, the company provided quarterly guidance of a 2% – 7% decline in sales and EPS of $.78 – $.86.


We expect that P&G has set the guidance bar low enough that they should be able to exceed expectations despite the tough economic headwinds. Despite operating in the traditionally strong consumer goods segment, we feel that P&G is positioned poorly for this recessionary environment. Their product lines consist primarily of premium products – the types of premium products that consumers are looking to trade down from.


The decline in consumer demand for their products could lead to the company reducing their full year 2009 guidance. The company is currently guiding for EPS of $4.20 – $4.35 which seems optimistic.


Share Performance

Since the beginning of the year, Procter & Gamble’s shares are down almost 20%. However, in 2008 P&G’s shares fell only 16% as they outperformed the 34% decline in the Dow Jones index.



Shares are now trading at 12x consensus 2010 EPS estimates. This is inline with the relative valuations of their peer group. While we expect that P&G may post a modest beat this quarter, we feel that full year 2009 estimates are likely to be revised downward.


Recommendation: Sell with a $44 price target.


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