Analysts Don’t Expect Gains at P&G

After posting good results in its fiscal second quarter, what will Procter & Gamble do for an encore? Not much, if you believe industry analysts.

P&G is set to report results tomorrow, but analyst consensus is looking for the company to post 82 cents in EPS, for a year-over-year decline of 2%, on $19.5 billion in revenue, for year-over-year growth of 6%.

That’s in contrast to last quarter, however, when the company saw organic revenue and volume growth of 5%, the best quarter of organic volume growth since early 2008, even though both revenue and EPS saw year-over year growth in the low-single-digit range. The gross margin expanded over 300 basis points, to 53.7%, and P&G seems to be regaining market share lost during late 2008 and early 2009. The company has a number of levers to pull in terms of earnings attribution to get to desired growth. After hiking prices during the heart of the meltdown in late 2008 and early 2009, volume is starting to return, and foreign exchange had a positive benefit last quarter, for the first time in five quarter.

Fabric & Home Care and Beauty Care represent over 60% of Procter & Gamble’s sales and over 50% of the company’s pre-tax income. In its second quarter, Fabric & Home Care grew revenue by 9%, but pre-tax income grew 40% year over year, and I’m not sure that is repeatable. Beauty Care revenue grew by 6% year over year, while pre-tax income grew 11%, so the expense leverage for both units is plain to see. The December quarter was the first quarter in the past five that Procter & Gamble grew both total revenue and pre-tax income on a year-over-year basis.