Consumer goods giant Procter & Gamble Co. (PG) is due to release its first-quarter results before the market opens Thursday. The Cincinnati, Ohio-based company operates in three global business units - Beauty, Health and Well-Being, and Household Care, and offers its products and services in over 180 countries.
The consumer products major's third-quarter results are likely to reflect many factors such as foreign currency translations, acquisitions and sale of certain brands and products, besides declining demand, as consumers continued to rein in expenses amid the economic meltdown.
In an effort to muddle through the most difficult macroeconomic environment, P&G has been trying to boost its sales and profit growth by focusing on cash and cost discipline. The company is also keen on maintaining investments in long-term growth opportunities and protecting the structural economics of its businesses around the world.
According to the "third" estimate released by the Bureau of Economic Analysis, real gross domestic product declined at an annual rate of 0.7% in the second quarter of 2009, reflecting negative contributions from private inventory investment, non-residential and residential fixed investment, personal consumption expenditures or PCE, and exports that were partly offset by positive contributions from federal government spending, and state and local government spending. Moreover, real personal consumption expenditures fell 0.9% in the second quarter, in contrast to an increase of 0.6% in the first quarter.
Most recently, P&G confirmed its earnings and sales outlook for the first quarter of fiscal 2010. The company still expects all-in earnings to range between $0.95 and $1.00 per share and core earnings in the range of $0.86 - $0.92 per share. Further, the company expects foreign exchange translation to reduce the first-quarter net sales by about 7%, resulting in net sales decrease of 7% - 10% versus last year. Organic sales growth is expected to be zero to negative 3% for the quarter.
Analysts are projecting earnings of $0.99 per share on revenues of $19.83 billion. In the prior-year quarter, the maker of Head & Shoulders and Pantene shampoos posted earnings of $1.03 per share and net sales of $22.0 billion.
The company also said it plans to report financial results for the Pharmaceutical business as a discontinued operation beginning with the first quarter, which will include a restatement of prior-year results.
Procter & Gamble expects to return to organic sales growth in the second quarter, compared to the prior year levels, following two quarters of organic sales declines. For the second quarter, P&G anticipates organic sales growth of 1% - 4%.
P&G recently also confirmed its prior outlook for organic sales growth of 1% - 3% for fiscal 2010. The company expects net sales growth in the range of flat to up 3% versus last year, which includes a foreign exchange impact of zero to minus 1%.
P&G currently projects fiscal 2010 earnings in the range of $3.99 - $4.12 per share, including a one-time net earnings increase of $0.44 per share from the sale of the Pharmaceutical business, which would be partially offset by $0.10 - $0.12 per share of earnings dilution related to the transaction. Core earnings for the year are expected to be in the range of $3.44 - $3.59 per share.
Earlier in August, the company, which also makes Tide detergents and Gillette shaving razors, had projected full-year 2010 earnings from continuing operations of $3.65 - $3.80 per share.
For the preceding fourth quarter, the company posted a decline in profit, totaling $2.47 billion or $0.80 per share, compared to $3.02 billion or $0.92 per share in the prior-year quarter, hurt by a stronger dollar and reduced demand across all categories, as consumers continued to scale back spending amid the economic downturn. Net sales declined 11% to $18.66 billion from $20.89 billion in the previous year, reflecting a 9% unfavorable foreign exchange impact.
Among Procter & Gamble's rivals, Kimberly-Clark Corp. (KMB) posted third-quarter net income of $582 million or $1.40 per share, up from $413 million or $0.99 per share a year ago, boosted by improved selling prices for its products and lower commodity and energy costs. Net sales dropped 1.7% to $4.91 billion from $5.00 billion in the previous year.
For fiscal 2009, Kimberly-Clark lifted its earnings forecast to a range of $4.50 - $4.60 per share from its prior range of $4.10 - $4.25 per share. The company now forecasts full-year net sales to decline about 2%, compared to the previous guidance for a decline of 4% - 6%.
Another peer, New York-based Colgate-Palmolive Co.(CL) is scheduled to release financial results for its third quarter on October 29, with analysts forecasting earnings of $1.11 per share on revenues of $3.94 billion.
Procter & Gamble shares, which have been trading between $43.93 and $66.82 in the past 52 weeks, closed Wednesday's trading session at $57.23, up 5 cents or 0.09%, on a volume of 15.6 million shares.
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