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Procter & Gamble (PG) |
HenryTo
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 Posted: Wed Apr 06, 2011 1:26 am Post subject: Procter & Gamble (PG) |
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Morningstar's latest views on PG:
| Quote: | | On Tuesday, Procter & Gamble PG announced its intention to merge its Pringles business--its last major food brand--with Diamond Foods DMND. The deal is valued at $2.35 billion, including $1.5 billion of Diamond Foods stock and the assumption of $850 million in Pringles debt, in a reverse Morris Trust transaction whereby P&G shareholders will own 57% of the new company. P&G expects that the deal will result in a one-time earnings gain of about $1.5 billion aftertax, or $0.50 per share. Our initial take is that the price seems fair at about 2 times sales, and we are holding tight on our fair value estimate for P&G, as we don't believe this transaction will move the needle for the large cons umer product firm--we estimate that Pringles represents merely 1%-2% of P&G's consolidated sales. P&G has been shedding businesses (such as Folgers) that no longer fit with its portfolio, so this announcement is not all that surprising to us. Overall, we contend that P&G shares still represent an attractive investment opportunity, and investors looking to gain exposure to the household and personal product industry should consider adding P&G shares to their portfolio. |
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Procter & Gamble (PG) Replies |
HenryTo
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Posts: 11742
Location: Los Angeles, California
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HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11742
Location: Los Angeles, California
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HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11742
Location: Los Angeles, California
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HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11742
Location: Los Angeles, California
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| Posted: Fri Apr 29, 2011 1:23 am Post subject: |
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Morningstar on P&G's fiscal 3Q earnings:
| Quote: | | Procter & Gamble's PG third-quarter results showcased healthy top-line and volume growth, but rising raw-material costs damped operating profits. The firm tightened its earnings per share guidance range, lowering the top end of the target primarily because of the impact of higher input costs. While gross margins declined significantly, down 160 basis points from the year-ago period, and operating margins were down even more, declining 210 basis points, this weakness masks improvements the firm is showing on other fronts. Total sales increased 5.0% to $20.2 billion versus the year-ago quarter, with internal sales growth at 4.0%. Compared with the year-ago period, sales volume increased 5.0%, with foreign exchange and pricing each added another 1.0% to the top line, but sales mix declined 2.0%, a function of more lower-price sales deriving from developing markets. A healthy sales increase of 7.0% on a internal basis in the firm's grooming business was boosted by 5.0% higher pricing. Volume in the business was a respectable 2.0% during the quarter. The firm has yet to push through pricing across its portfolio but we think the trade-off of higher sales and modest volume increases is a good one since, at least based on this quarter's results, operating profits will remain intact. Grooming and fabric care were the only business segments to deliver operating profit growth in the quarter at 13.4% and 2.3%, respectively, but only grooming had the benefit of pricing. P&G faces significant commodity headwinds, but it seems to be on more solid footing than it has been in some time. We expect it to selectively implement price increases in the coming quarters, and while volumes may decline modestly, profitability should improve. Our fair value estimate of $77 per share remains intact, and at roughly 16 times forward fiscal 2011 earnings, the shares are still attractively priced, in our opinion. |
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