What’s Next for The Procter & Gamble Company (PG)

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Shares of The Procter & Gamble Company (NYSE:PG) jumped $3.18, or 4%, to $81.88 after the ouster of embattled CEO Bob McDonald and the announcement that he will be replaced by former CEO A.G. Lafley.

The Procter & Gamble Company (NYSE:PG)

McDonald, at the helm since 2009, had been under the microscope from the consumer products giant’s board amid a string of weak earnings reports. While he did make some notable progress of late, refocusing on P&G’s best-selling brands and cutting costs, sales growth has trailed rivals Colgate-Palmolive Company (NYSE:CL) and Unilever plc (ADR) (NYSE:UL).

For the quarter ended March 31, The Procter & Gamble Company (NYSE:PG) posted lackluster results. Profits came in at $2.57 billion, up from $2.41 billion in the same quarter a year ago. Net sales rose a slim 2% to $20.6 billion. Organic sales increased 3%, coming in at the low end of the company’s forecast.

Shares, up 22% since the start of the year to an all-time high of $82.54, stumbled nearly 5% following the uninspiring report.

The company has been reducing headcount and slashing costs in an effort to fund the development of new products such as single-dose Tide Pods laundry detergent and thicker Bounty paper towels. But competitors have fought back with some heavy discounting, weighing on P&G’s progress in this area.

In addition, The Procter & Gamble Company (NYSE:PG)’s Olay skin-care line continues to underperform. It’s those kinds of limp showings that prompted McDonald’s expulsion.

Rivals giving P&G a run

Earnings for Colgate-Palmolive Company (NYSE:CL)’s latest quarter were $1.32 per share on revenue of $4.32 billion, up from $1.24 per share and revenue of $4.30 billion in the same quarter a year ago. For the current fiscal year, Colgate is expected to post EPS of $2.85.

The company just split shares 2-for-1. A leading stock-split theory says a company splits shares when they are trading well above the target range for where the company would like its shares trade. Forward splits are a good indication of sustained and strong earnings going forward.

Over the last 10 years, a 2-for-1 split model portfolio has produced a 14% annualized return, besting the 8% gain for the Standard & Poor’s 500 index, including dividends, according to Hulbert Financial Digest.

That suggests Colgate’s future looks solid.

Founded in 1806 by William Colgate as a starch, soap and candle company, Colgate now markets a broadly diversified mix of products worldwide running the gamut from household and personal care products to industrial supplies to sports and leisure time equipment.


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