P&G Expects to Top 3Q Estimates

Procter & Gamble shares hit a 52-week high Wednesday, gaining as much as 4.4% after the consumer-products giant said increased sales will push third-fiscal-quarter earnings above Wall Street estimates.

Late Tuesday, P&G also announced a boost in its quarterly dividend to 50 cents from 46 cents, and a 2-for-1 stock split. In afternoon trading, shares of the Cincinnati-based company (PG: news, chart, profile) traded $4.09 higher, representing a 4% to $106.58. Trading volume was more than double the daily average, at 7.7 million shares compared with an average of about 3 million. Earlier in the day, shares gained all the way to $107.21, cruising past a previous 52-week high of $104, reached Feb. 24.

“This continues the company record of increasing the dividend for 48 straight years,” said Douglas Christopher, an analyst with Crowell Weedon & Co. “Not many companies are able to do that.”

Led by its health, beauty and home-care lines, P&G said strong volume and sales growth would push third-quarter earnings above previous estimates. “P&G’s strong results, reflecting balanced, consistent growth, have given the Board the confidence to raise the dividend for the second time this fiscal year, and to split the stock,” said A.G. Lafley, P&G’s chairman, president and chief executive.

“P&G is committed to sustaining growth and building shareholder value, year in and year out. The company remains focused on what’s working: serving the consumer as boss, focusing on leading brands, countries, and customers, building fast-growing businesses such as beauty care and health care, keeping costs low, and leveraging P&G’s core strengths in branding, innovation, scale and go-to-market capabilities.”

For the January through March quarter, organic volume growth is expected to be about 10%. This growth is on top of a strong base period of eight percent organic volume growth. The volume growth is broad-scale across business units and geographies, and continues to be led by health care, beauty care, fabric and home care, and developing markets.

Foreign exchange is expected to increase sales by 3-4%, primarily due to strength of the euro, Canadian dollar and British pound. Acquisitions (primarily Wella) are expected to add seven to nine percentage points to sales growth. Total sales for the quarter are expected to increase about 20 percent.

Earnings per share for the quarter as well as the fiscal year should exceed current consensus estimates by $0.01 to $0.02, as a result of strong volume and sales performance. Strong top line performance is expected behind initiatives such as Prilosec OTC, Olay Regenerist, Crest Whitening Expressions, Mr. Clean Magic Eraser and global expansion of Herbal Essences, as well as base business growth driven by increased marketing support.

The company said earnings for the January-through-March quarter, which are to be reported April 30, would beat analysts’ average estimate by 1 or 2 cents a share.

On average, analysts polled by Thomson First Call have been expecting earnings per share of $1.06, before Tuesday’s announcement. Analysts’ revised average estimate is $1.08 per share.

P&G forecast volume growth of about 10 percent for the quarter, boosted by sales in its Prilosec OTC, Olay, Crest, Mr. Clean and Herbal Essences lines.