PG Stock: Can Procter & Gamble Beat Earnings in Q1?

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Anyone that has ever faced adversity wants only one thing: a single, paradigm-shattering moment to prove the detractors wrong.

PG Stock: Can Procter & Gamble Beat Earnings in Q1?

For consumer goods giant Procter & Gamble (PG), its executive management team is pressing investors for additional time to demonstrate that a tough economy and an extremely volatile performance by PG stock is not justification to break up Procter & Gamble more so than it already has.

To make its case, the company will largely depend on its oratorical persuasion, as the facts are clearly not in its favor.

PG Stock: More Pain to Come

Since the end of fiscal year 2012, PG has failed to improve its top-line sales trend, which dropped nearly 9% over a three-year period. Even worse was the net income performance, which fell nearly 35% over the aforementioned time frame, despite making decent gains in FY2013 and FY2014.

As a result, Procter & Gamble’s revenue growth and earnings before interest, taxes, depreciation and amortization together average a startling 12% loss in the past year.

For long-term investors of PG, the poor fundamentals have translated into a year-to-date loss of more than 18%. The severity of the decline is even more perplexing considering that in 2014, PG stock returned nearly 17%. In fact, not since the 2008 global financial collapse have we seen such sustained volatility in the de facto consumer goods leader.

Recent earnings performances unfortunately suggest that there is more pain to come for Procter & Gamble shareholders. From the first quarter of FY2014 to Q4 FY2015, only one time did PG meet or exceed its earnings consensus target. This is in sharp contrast to the prior eight quarters, in which PG stock beat Wall Street estimates in all but one instance.

Furthermore, the hard numbers from the markets clearly articulate the fact that investors are gradually losing patience. Between October of 2011 and August of 2013, PG stock investors saw on average a 0.49% lift a month after an earnings release.

From October of 2013 onward, however, the same metric only generated a minuscule 0.06% average gain. Tellingly, the former time period saw a 32% move up in PG stock, while the latter has only produced a 2% return.

Given the overall decline in the earnings per share trend, it remains highly questionable that PG stock can hit, let alone exceed, the consensus estimate of 95 cents for Q1 FY2016.

The Technicals Look Bad for PG Stock Holders

The average EPS figure for Procter & Gamble over the past four quarters is 60 cents, and the problems that have been affecting consumer goods stocks — namely, China and other emerging markets, as well as unfavorable currency dynamics hitting international sales — have become more acute.

PG stock, technical analysis
Source: Source: JYE Financial, unless otherwise indicated

If there was reason for optimism, it would likely appear in the technical charts. But again, PG stock confirms nothing but bearishness.

Since late December of 2014, the consumer goods behemoth has been trading inside a sharply declining trend channel. Rallies have been short-lived, meeting heavy resistance before the bulls get too comfortable.

Currently, PG shares are stuck in between its 50- and 200-day moving averages, which almost screams indecision as investors anxiously await the Q1 results.

The spinning off of Procter & Gamble’s heavily endowed asset portfolio may not solve all of the company’s critical problems — there’s only so much that can be cut or sold before one has to figure out how to sell products in less than favorable markets.

Still, it’s worth serious consideration, and given the state of PG stock, that discussion needs to happen sooner rather than later.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

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A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.


Article printed from InvestorPlace Media, https://investorplace.com/2015/10/pg-stock-procter-and-gamble-consumer-goods/.

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