P&G on Target

The company guides lower for the second quarter but in line for the year.
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Procter & Gamble (PG) - Get Report posted a solid first quarter and boosted its full-year earnings target, citing progress in integrating the Gillette acquisition.

The Cincinnati-based maker of Tide and Crest made $2.21 billion, or 63 cents a share, for the quarter ended March 31, up from the year-ago $1.61 billion, or 59 cents a share. Revenue rose 21% from a year ago to $17.25 billion. Analysts surveyed by Thomson Financial were looking for a 61-cent profit on sales of $17.6 billion.

Organic sales growth, excluding acquisitions and certain other factors, was 6% in the latest quarter. Unit volume rose 22%, 5% organically. Operating margin increased by 160 basis points and gross margin by 110 basis points, as the mix benefits of Gillette, along with volume growth, price increases and cost savings initiatives more than offset higher commodity costs.

Earnings dilution in the latest quarter from the Gillette deal was 7 or 8 cents a share, in range with P&G's targets, the company said.

"The combination of strong topline momentum, improving gross margins and good progress on Gillette integration gives us the confidence to raise our EPS outlook for the fiscal year," said CEO A.G. Lafley. "P&G is delivering strong, sustainable earnings growth despite Gillette dilution. Excluding Gillette, P&G is on track to deliver a fourth consecutive year of double-digit EPS growth."

The company repurchased $3.7 billion of P&G stock during the quarter as part of its previously announced Gillette share repurchase program, including some transactions that settled in April. This brings the cumulative value of shares purchased under the program to $15.8 billion. The company continues to expect to repurchase about $20 billion in total under the program and to complete the program by midcalendar-year 2006.

P&G guided to earnings of 52 to 54 cents a share for the second quarter, against a 55-cent Thomson estimate, and $2.61 to $2.63 for the year, in line with the $2.62 Wall Street target.