The results of the second quarter of fiscal year 2013 for The Procter & Gamble Company (NYSE:PG) can indeed be a source of joie de vivre, the zest for life often extolled in the advertisements and marketing campaigns of personal care products and even in the cleaning agents of P&G. In the quarter ended Dec. 31, the company, which manufactures such household brands as Tide, Downy, Crest, and Pampers, more than doubled its net profit to $4.06 billion, or $1.39 per share. In comparison, the company recorded $1.69 billion in profit, or 57 cents per share, in the same quarter last year.
Growth of sales revenue in 2013 rose by 2% to $22.18 billion from the year-earlier period. These results were better than stock analysts’ expectations of $1.11 per share and revenue of $21.86 billion. Its better-than-expected performance for the quarter prompted P&G to revise its fiscal 2013 core earnings per share upward to between $3.97 and $4.07 on the back of 1%–2% revenue growth. Previously, the company expected this fiscal year to show an adjusted profit of between $3.80 and $4.00, with revenue growth either flat or showing a 1% gain. Analysts now expect fiscal 2013 earnings of $3.97 per share for P&G.
P&G Shares Hit 52-Week High
With such impressive figures and confident management outlook, it would appear that Procter & Gamble is a shoo-in for any portfolio. This sentiment is apparently shared by many investors, as P&G shares hit a new 52-week high of $76.69 on Feb. 6 after opening at $75.44 and settling at $75.50 at the close of trading.
Still, there are some valid concerns about how far the future growth of Procter & Gamble can go, as indicated by analysts’ expectation of fiscal 2013 EPS of $3.97, the low end of P&G’s forecast. One of these issues is market share. True, the company reported that it either maintained or increased its market share in businesses accounting for almost 50% of the fiscal 2013 quarter, a figure that rises to 60% in the U.S. market. However, there’s yet much to be desired, as it was estimated that at some point last June P&G was losing two-thirds of its market share to competition.
But More Push Needed In Emerging Markets
This debacle is compounded by the company’s inability to build market share in developing countries where Procter & Gamble is being challenged vigorously by rivals like Unilever plc (ADR) (NYSE:UL). Unilever, whose annual sales of 51 billion euros are comparable to Procter & Gamble’s, has also edged P&G in recent years in terms of sales growth. During the last three fiscal years, Unilever’s revenue growth averaged 6.9%. P&G, on the other hand, posted an average annual revenue growth of 2.3% from fiscal 2010 to 2012, after suffering a decline in 2009. This drop followed a banner sales performance in 2008.