Morningstar

P&G's Strategy Gaining Traction as Sales Rise

P&G's Strategy Gaining Traction as Sales Rise
Securities In This Article
Procter & Gamble Co
(PG)

Erin Lash: The main headline coming out of Proctor and Gamble's first-quarter results was the pronounced uptick in its top-line performance. More specifically, organic sales grew 4% in the quarter and that growth was fairly broad-based with four of the firm's five operating segments posting improvement to the tune of a mid- to high-single-digit clip.

The one laggard remains the firm's baby and family care segment, which slipped about 1%. But we still think that these results indicate that the firm's efforts to rationalize its brand mix and hone its resources on its highest performing categories is beginning to gain traction.

The firm isn't focused merely on growing its top line. Rather, the firm is also working through extracting another $10 million of costs from its operations as a means by which to offset commodity costs headwinds, which ate into profitability, as well as to fuel additional spending behind its marketing as well as research and development.

Despite the 8% uptick in shares, we still view the stock as mildly undervalued and would suggest long-term investors consider building a position in this wide-moat name.

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About the Author

Erin Lash, CFA

Sector Director
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Erin Lash, CFA, is a sector director, AM Consumer, for Morningstar*. In addition to leading the sector team, she covers packaged food and household and personal care companies. Beyond managing a team of nine analysts and associates covering an array of consumer firms, Lash also conducts fundamental analysis of 13 multi-billion-dollar market capitalization firms in the packaged food and household and personal care space.

Before joining Morningstar in 2006, Lash spent four years as an investment analyst covering retail, transportation, and technology firms for State Farm Insurance. In this capacity, Lash analyzed financial statements, business strategy, and fundamentals of owned companies and potential investments, presenting her recommendations based on this analysis to State Farm portfolio managers for ownership consideration.

Lash holds a bachelor’s degree in finance from Bradley University’s Foster College of Business. She also holds a master’s degree in business administration, with concentrations in accounting and finance, from the University of Chicago Booth School of Business. Lash has completed the Chartered Financial Analyst® designation. She ranked second in the food and tobacco industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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