procter & gamble earnings preview: the absolute essentials
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Procter & Gamble Fiscal 4th Quarter Earnings PreviewTRANSCRIPT
Procter & Gamble Earnings Preview:
The Absolute Essentials
P&G Fiscal 2014 Fourth Quarter
Are investors looking for Cheer? Image: Procter & Gamble.
• P&G is shooting for 3%-4% organic revenue growth this year.
• On track through the first three quarters of fiscal 2014.
• Company should hit at least 3% organic revenue growth in this final quarter of the fiscal year.
Revenue
“Tide on the Shelf” image by Lisa Brewster under Creative Commons license.
• Earnings have not impressed so far in fiscal 2014.
• Through the first three quarters, operating income is up only 2.6% versus prior year.
• Will P&G make up some ground in Q4?
Earnings
• Productivity and cost cutting should help improve core gross margin sequentially from last quarter’s 48.9%.
Productivity & Cost Cutting
“Global Ops” image: Procter & Gamble.
• P&G measures “free cash flow productivity” (FCFP): free cash flow divided by earnings.
• FCFP was 120% last quarter.• Cash flow should still be strong, but look for
Q4 FCFP to be closer to last year’s total average of 95%, due to anticipated increased spending on capital equipment.
Cash Flow
• P&G has kept a fairly leveraged balance sheet for years.
• Traces back to Gillette acquisition in 2005/2006.
• Look for any reduction in the $36.4 billion of long-term debt this quarter.
Balance Sheet
• Bright spots: Double-digit growth in India for 47 consecutive quarters.
• Hot spots: Any impacts from Russia & Ukraine?
• Sinkholes: Updates on currency quagmires of Argentina, Venezuela.
Bright Spots, Hot Spots, & Sinkholes
Duracell marketing in Caracas, Venezuela metro. Image by Cabruta08 under Creative Commons license.
• P&G announced a total revamp of its North American supply chain earlier this year.
• Converting existing single-category plants into multi-category facilities.
• Progress in Q4?
Supply Chain
• Look for update on initial sales of new Gillette Fusion ProGlide with Flexball razor.
• Analysts will be eager to hear about innovation pipeline for fiscal 2015.
Product Innovation
Fusion ProGlide with Flexball image: Procter & Gamble.
• Share buybacks should be winding down, perhaps another $0.5 billion in Q4.
• No surprises expected on stable dividend.
Dividend and Share Repurchases
P&G Research Facility, Singapore. Image: Procter & Gamble.
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