NEW YORK (TheStreet) -- Procter & Gamble (PG) and its CEO, Alan Lafley, are feeling some heat this summer, and I don't mean just from the weather. It's been a little over a year since the iconic consumer goods company announced Lafley would replace then CEO Robert McDonald.
McDonald was in the early innings of a turnaround initiative to cut $10 billion in costs through 2016. His plan to revitalize P&G's focus on its leading businesses after losing market share to such rivals as Unilever (UN) was interrupted when activist investor Bill Ackman purchased $1.8 billion of PG stock and pushed to replace McDonald.
Now the stock is below the level it rose to after Lafley replaced McDonald. Shares closed Monday at $80.19, down 1.5% for the year to date. After reporting flat first-quarter revenue numbers the company also confessed that its year-over-year quarterly earnings growth had risen a paltry 1.7%.Although P&G raised its dividend to $2.57, making the yield-to-price a tempting 3.21%, this lifted the payout ratio to 65%. That ratio won't subside until the company's earnings growth increases. That is precisely what the company's largest shareholders are waiting for. Growing earnings shouldn't be difficult for a company that serves approximately 4.8 billion people globally with its panoply of brands.
The company's Prilosec OTC remains the #1 best-selling over-the-counter frequent heartburn medicine for nine straight years. Yet, if I were the CEO and saw the following one-year price chart of my company's stock, I might require some heartburn relief.
PG data by YCharts The blue price line looks like a roller-coaster ride for investors. The orange quarterly year-over-year retained earnings and the red trailing twelve month diluted earnings per share lines both look like precipitous followed by a tiny rebound for EPS.
CEO Lafley is personally impacted by the stock's volatility. As of June 30 he owned nearly 627,000 shares valued at over $50 million!
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV