For the three months ended Dec. 31, Cincinnati-based P&G said its net earnings for the period were $1.30 billion, or 93 cents a diluted share, including a $146 million aftertax restructuring charge related to the company’s streamlining of operations and business portfolio. Last year, P&G earnings reached $1.19 billion, or 84 cents a share, and included a $120 million aftertax restructuring charge. Excluding the restructuring charges, core earnings were $1.45 billion, or $1.03. Net sales for the quarter increased 2.1 percent, to $10.39 billion from $10.18 billion.
“We are seeing clear improvement in our results, and we’re pleased to have met our commitment once again,” A.G. Lafley, P&G’s president and chief executive officer, said in a statement. “We are continuing our unyielding focus on delivering better consumer value on our brands, building core categories, reducing the company’s cost structure and improving our cash flow.”
Over the past year, P&G — which markets 250 brands including Pantene, Olay, Clairol Nice ‘n’ Easy and Herbal Essences — has undertaken several steps to try to boost sales of its core brands, while also cutting costs, eliminating some smaller or underperforming brands, and cutting thousands of jobs. For instance, during the quarter, capital spending was down $300 million while core gross margin improved 1.8 percent, reflecting lower manufacturing costs and increased restructuring savings.
Describing the quarter as “great,” Amy Chasen, managing director and securities analyst at Goldman Sachs, said the highlights were overall volume growth and margin expansion, suggesting that the restructuring and cost-saving plans are trending nicely. She also said she is “very confident” with earnings expectations and said there could be some upside deviation.
“P&G benefited from increased focus on its core businesses like hair care products and laundry detergent over the past several years instead of focusing on brand-new brands,” Chasen said. “Now that they have stepped up the focus on core brands, they can regain the market share they have lost.” Chasen said P&G is at the early stages of recovery.
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Investors were pleased with the overall results, sending shares up $3.39, or 4.3 percent, to close at $81.68 in New York Stock Exchange trading Thursday. The stock briefly hit a new 52-week high of $82.12.
Looking ahead, the company said it expects third-quarter earnings per share in the high-single digits, excluding the restructuring charges, reflecting strong volume and restructuring benefits. In addition, it said it anticipates sales to be up in the mid-single digits versus a year ago and volume to be up in the high-single digits. Analysts on average expect EPS of 79 cents, which is better than the 75 cents P&G delivered last year.
For the year, the firm confirmed that it is comfortable with Wall Street’s guidance of $3.47, outpacing last year’s earnings of $3.25. Sales are expected to be at or ahead of last year’s growth and approaching the target range of 4 to 6 percent. Volume is projected to be in the mid-single digits.
In the quarter, beauty care continued to deliver strong results, led by progress on hair care across all regions. Net sales were $2.06 billion, up 11 percent from a year ago, driven by Pantene, Head & Shoulders and Clairol. Driven by the Clairol acquisition, unit volume increased 15 percent. Excluding the impact of acquisitions and divestiture, units rose 3 percent.