Jefferies Says Procter & Gamble Is a 'Buy' After Upbeat Analyst Day

Jefferies remains bullish on Procter & Gamble (PG) after the company hosted its analyst day on Friday. The firm maintained a "buy" rating on shares of the consumer packaged goods company and said it remains a core holding following the "upbeat" event.

"We remain positive on P&G after the co.'s analyst day where management reiterated its long-term growth algorithm and underscored its emphasis on balanced top/bottom line growth," Jefferies wrote in an analyst note.

While recent strength in the U.S. dollar may weigh on results, the firm views fiscal 2017 guidance as sufficiently conservative. "Year-to-date trends are solid and we like the set-up with room to re-rate as organic sales growth improves," Jefferies added.

P&G reiterated its message around driving top and bottom line growth, including organic sales modestly above market growth, which is currently 3% to 3.5%, its $10 billion productivity plan to largely fund investment, such as research and development, and operating margin percentage expansion to achieve mid or high-single digit percentage growth in earnings per share.

But the firm reduced its price target to $93 from $98 due to foreign exchange and a lower group multiple. Jefferies also cut its fiscal 2017 to 2019 earnings estimates by about 2% to 3% to account for recent U.S. dollar strength. CFO Jon Moeller added that this headwind is unlikely to reverse in the second quarter and could pressure results.

More than half of P&G's sales come from outside of the U.S. In fiscal 2016, North America made up 44% of net sales, while 56% came from Europe, Asia Pacific, Greater China, Latin America and India, the Middle East and Africa. A stronger dollar makes its products more expensive overseas.

Jefferies believes fiscal 2017 guidance is "sufficient" as it already embeds "healthy levels" of investment and conservatism. P&G expects full-year organic sales growth of about 2% and earnings per share increasing in mid-single digits year-over-year. The company reported fiscal 2016 earnings of $3.67 per share.

Shares of P&G were higher by 0.32% to $82.26 in late-morning trading on Monday. The stock is up nearly 4% year-to-date.

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