How Will Procter & Gamble (PG) Stock Be Affected By Its Consolidation?

NEW YORK (TheStreet) -- Procter & Gamble (PG) shares are down -1% to $78.83 on Monday after the company announced that it planned to sell up to 100 brands over the next two years in an effort to reduce costs.

The remaining 70-80 core brands that will remain after the restructuring account for about 90% of the company's revenue and over 95% of its profits over the past three years, according to the company.

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On Friday, the company reported a 37% increase in second quarter earnings to 89 cents per diluted share, although net sales declined 1% from the year ago period.

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 increase in net income, good cash flow from operations, growth in earnings per share, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

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

  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Household Products industry average. The net income increased by 1.7% when compared to the same quarter one year prior, going from $2,566.00 million to $2,609.00 million.
  • Net operating cash flow has slightly increased to $4,109.00 million or 6.39% when compared to the same quarter last year. In addition, PROCTER & GAMBLE CO has also modestly surpassed the industry average cash flow growth rate of 4.13%.
  • PROCTER & GAMBLE CO's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. 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 ($4.19 versus $3.87).
  • The current debt-to-equity ratio, 0.52, 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.
  • The gross profit margin for PROCTER & GAMBLE CO is rather high; currently it is at 52.73%. 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 12.69% compares favorably to the industry average.
  • You can view the full analysis from the report here: PG Ratings Report
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