Yacktman Asset Management's Proctor & Gamble Rises on Strong Fiscal 4th-Quarter Organic Sales Growth

Company reports strong organic sales growth in 8 out of 10 global regions in a competitive environment

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Jul 31, 2018
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Proctor & Gamble Co. (PG, Financial), a major holding of Yacktman Asset Management (Trades, Portfolio), said revenues for the 12 months ending June 30 increased 3% year over year, driven by strong organic sales growth in eight out the company’s 10 global regions.

The Cincinnati-based company reported revenues of $16.5 billion for the fiscal fourth-quarter, up 3% from the quarter ending June 2017. Core earnings per share were 94 cents, outperforming analyst estimates by approximately 4 cents and up 11% from the prior-year quarter.

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Company reports strong organic sales growth across global markets

CEO David Taylor said eight of the company’s 10 product categories and 12 of the company’s top 15 countries grew organic sales during the quarter, driven by “continued innovations to strengthen the superiority of [P&G’s] products and brands.” Top-performing countries included Turkey, India and Japan; with the former two countries delivering double-digit sales growth that was driven by higher sales across all categories.

Taylor underscored during the earnings call that while P&G operates in a “very dynamic environment,” the company expects to “accelerate change in the organization and culture” to meet challenges that can affect consumer demand. The CEO mentioned several initiatives, including investments in skin-care brands like Olay and SK-II. According to Taylor, the former increased organic sales growth at least 10% over the past five quarters while the latter increased organic sales growth at least 20% over the past 15 quarters.

Company raises guidance for upcoming fiscal year and increases dividend for 62nd consecutive year

P&G anticipates fiscal 2019 organic sales growth between 2% and 3%, an improvement of 1% to 2% from fiscal 2018. Core earnings per share are expected to increase between 3% and 8% year over year, with higher growth during the second half as pricing and productivity savings offset increasing commodity costs and foreign exchange headwinds.

GuruFocus lists five positive investing signs for P&G, including expanding operating margins, a price-sales ratio near a two-year low and a dividend yield near a 10-year high. P&G increased its dividend by 4% in April, making fiscal 2018 the 62nd consecutive year of dividend increases. The company’s operating margin is near a 10-year high of 21.45% and outperforms 91% of global competitors, which include Unilever PLC (UL, Financial) and Kimberly-Clark Corp. (KMB, Financial).

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Yacktman Funds have high ownership in P&G

Yacktman Asset Management (Trades, Portfolio) has not released their second-quarter portfolio as the deadline is 45 days after quarter-end. During the first quarter, the firm owns 15,382,957 shares of P&G, representing 12.55% of the portfolio.

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On the other hand, Stephen Yacktman and co-manager Jason Subotky disclosed in their second-quarter portfolio reports that they own 7.8 million P&G shares in their Yacktman Fund and 4.775 million P&G shares in their Yacktman Focused Fund.

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See also

Berkshire Hathaway Inc. (BRK.A)(BRK.B) CEO Warren Buffett (Trades, Portfolio) owns a small stake of 315,400 shares of P&G.

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Disclosure: No positions.