P&G Pleases Wall Street

14 June 2002

Fuelled by strong sales growth, household products colossus Procter & Gamble saw its share leap by four dollars or 4.5% on Wednesday after hiking its guidance for Q4 earnings growth.

The Cincinnati-headquartered group now predicts a year-on-year “high teens” percentage increase in earnings-per-share compared with $0.63 (€0.67; £0.43) for the same quarter in 2001. Its latest forecast reflects better than anticipated volume growth of between 9%-10%, while margins are also expected to rise by one percentage point, confirming earlier guidance.

Much of the growth came from North America, particularly in the beauty care, health care and fabric and home care sectors. Brands such as Tide detergent and Crest oral care products – including newer products such as Spinbrush electric toothbrushes and teeth-whitening strips, as well as toothpaste – all burgeoned.

Another strong contributor both to growth and margins was the Clairol range, acquired last year from Bristol-Myers Squibb for $4.95 billion – the group’s largest ever purchase [WAMN: 22-May-01].

Wall Street was happier than a vampire at a bloodbank, especially with the performance of P&G chief executive Alan G Lafley who turned round the listless giant after replacing predecessor Durk (three profit warnings in as many months) Jager in the summer of 2000. Since his appointment Lafley has reinvigorated P&G’s flagging flagship brands and pursued a policy of innovation.

“It is clear that P&G's focus on its big brands, innovation, and the consumer value equation is paying off in the form of more consistent, higher quality results,” rhapsodized Merrill Lynch on Wednesday as it upped its intermediate and long-term ratings on P&G from ‘buy’ to ‘strong buy’.

Data sourced from: Financial Times; additional content by WARC staff