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Why Procter & Gamble (PG) Stock Is Down Today

NEW YORK (TheStreet) -- Procter & Gamble  (PG) dipped Wednesday after the world's biggest household products maker reported flat net sales in its third-quarter earnings.

The company reported earnings of $2.61 billion, or 90 cents a share, up from $2.57 billion, or 88 cents a share, in the same period one year earlier. Core earnings per share, excluding restructuring charges, increased 5% to $1.04, which beat the $1.01 expectation of analysts polled by Thomson Reuters I/B/E/S.

But P&G's net sales stayed flat at $20.6 billion, while organic sales increased 3%. Organic sales in the fabric care and home care section, which generates almost one third of sales, rose 6%. Sales in grooming, P&G's most profitable division, ticked upward 1%, while sales in the struggling beauty division rose 2%. 

P&G did not change its fiscal 2014 forecasts, as it still anticipates organic sales to grow 3% to 4% and core earnings to increase 5% to 7%.

The stock was down 0.94% to $79.85 at 10:13 a.m. on Wednesday.

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Separately, TheStreet Ratings team rates PROCTER & GAMBLE CO as a "buy" with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate PROCTER & GAMBLE CO (PG) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • PG's revenue growth has slightly outpaced the industry average of 0.9%. Since the same quarter one year prior, revenues slightly increased by 0.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The current debt-to-equity ratio, 0.51, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that PG's debt-to-equity ratio is low, the quick ratio, which is currently 0.50, displays a potential problem in covering short-term cash needs.
  • PROCTER & GAMBLE CO's earnings per share declined by 15.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PROCTER & GAMBLE CO increased its bottom line by earning $3.87 versus $3.12 in the prior year. This year, the market expects an improvement in earnings ($4.20 versus $3.87).
  • The gross profit margin for PROCTER & GAMBLE CO is rather high; currently it is at 53.76%. Regardless of PG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PG's net profit margin of 15.38% compares favorably to the industry average.
  • In its most recent trading session, PG has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: PG Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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