Tuesday, 27 January 2015

The price I've noted down to buy P&G stock

I called my last review of P&G 'good numbers but suits income chasing not capital growth investors'.  Since then P&G shares traded initially up...but have fallen back in the last few days (and including today):


So what is going on?  Divisionally Fabric Care, Grooming and Baby/Family Care had net positive volume/price but overall it was a rather dull set of number...until you get to the foreign exchange line. 


October – December 2014ForeignOrganicOrganic
Net Sales DriversVolumeExchangePriceMixOther*Net SalesVolumeSales
Beauty, Hair and Personal Care-2%-4%1%0%-1%-6%-2%-1%
Grooming-2%-7%4%0%0%-5%-2%2%
Health Care-2%-4%0%3%0%-3%-2%1%
Fabric Care and Home Care2%-6%1%0%-1%-4%2%3%
Baby, Feminine and Family Care0%-6%1%3%0%-2%0%4%
Total P&G0%-5%1%1%-1%-4%0%2
%

To get a feel for the impact take a look at the Q2 FY15 (the three month period just reported on) in currency neutral terms...


...and then in headline terms:

That is quite a difference and testimony to the strong US dollar influences I have noted multiple times recently (including earlier today in my United Technologies write-up here).  

So how about FY15?  Well it drags down that core EPS line again (the 'all-in' and 'constant $' measures are more volatile due to divestments and related)...


...but at least the company is returning money to shareholders.  Using the mid-point of the share repurchase guidance this equates to a return to shareholders of around 5.6% of the current market cap (just over half being paid out in a dividend).  


So with the income friendly aspect still established, what about the capital growth biased investor?  With the shares trading at around high x14s EV/ebit for their FY15e, a more reasonable entry point would be sub x14 EV/ebit or a share price around US$83.  

Interestingly this is a level which has shown some resistance/support at a couple of points over the last year.  


This is the level I have noted down.  

1 comment:

  1. The utmost bullish viewpoint for the p&g stock is given by Credit Suisse research firm analyst Michael Steib. The $105 target price mentioned by the analyst is the highest by any research analyst. Conversely, Eane BNP Paribas analyst Mr. Jeff Stent has given the lowest price target of $83 to Proctor & Gamble Co (PG).

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