Procter & Gamble (PG) Stock Gains on $12 Billion Sale of Three Businesses to Coty

NEW YORK (TheStreet) -- Procter & Gamble (PG) shares are up 1.46% to $79.26 in pre-market trading on Tuesday after the company announced that beauty products manufacturer Coty (COTY) won an auction to purchase three business from P&G for up to $12 billion.

Coty won an auction for two businesses related to its fragrance and beauty product operations as well as a third auction for P&G's hair care business.

Some of the brands Coty gained in the auction include Max Factor, CoverGirl and Wella.

Procter & Gamble began informing Coty and other bidders of the result of the auction over the weekend.

Coty has reportedly spoken to bankers about facilitating the purchase through a Reverse Morris Trust that will save P&G from paying any capital gains taxes on the deal, according to the New York Post.

TheStreet Ratings team rates PROCTER & GAMBLE CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate PROCTER & GAMBLE CO (PG) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its expanding profit margins, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel its 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 gross profit margin for PROCTER & GAMBLE CO is rather high; currently it is at 53.92%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 11.86% is above that of the industry average.
  • 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 0.57, displays a potential problem in covering short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Household Products industry and the overall market on the basis of return on equity, PROCTER & GAMBLE CO has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • PROCTER & GAMBLE CO' earnings per share from the most recent quarter came in slightly below the year earlier quarter. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, PROCTER & GAMBLE CO's EPS of $3.87 remained unchanged from the prior years' EPS of $3.87. This year, the market expects an improvement in earnings ($3.97 versus $3.87).
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.9%. Since the same quarter one year prior, revenues slightly dropped by 7.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: PG Ratings Report

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