On July 30th, 2020 Procter & Gamble reported their 4th quarter and Full-Year 2020 earnings results (see P&G’s press release here).
For the quarter, the company reported top line revenues of $17.7 Billion, beating the $17.0 Billion consensus estimate, and bottom line ‘core’ earnings of $1.16 besting the $1.01 consensus eps estimate.
For the year, the company reported revenues of $70.950 Billion up 5% from 2019s $67.684 Billion and FY ‘core’ of $5.12 per share, up 13% from 2019s ‘core’ eps.
Net Sales Growth
Full-Year 2020 ‘net’ sales growth (net excludes the impact of acquisitions, divestitures, and foreign exchange) grew 5% vs. 2019 driven primarily by the healthcare (+10%) and Fabric & Home Care (+7%) segments. Both Beauty and the Baby, Feminine & Family Care segments also grew (up 4% and 3% respectively) and the grooming segment continued to struggle declining 2%. Overall, foreign exchange conversions detracted 2% from organic revenues, and price increases added 1%.
In the June quarter, Fabric & Home Care organic sales gained 14% vs. the same quarter in 2019. Gains were driven by a 30% jump in Home Care revenue as increased consumer demand for home cleaning supplies continues during the COVID-19 pandemic. Organic Grooming revenues declined 1% vs. Q4 2019 driven by Shave Care declines in the mid-single digits as consumers shave less during the COVID-19 pandemic.
Sales Growth Forecast
P&G announced its fiscal 2021 ‘all-in’ sales growth forecast of 1% to 3% versus 2020 and ‘core’ earnings per share of $5.12. Applying 2021 eps guidance to PG’s July 30th 2020 closing price ($131.42) gives PG a price/earnings valuation of 25.6x forward earnings.
Unless actual 2021 earnings come in higher than expected, their current valuation looks rather lofty vs. a P/E range of 14.6x (2011) and 25.7x (2019). However, the COVID-19 pandemic and related economic shutdowns, have caused investors to favor Consumer Goods companies for their relatively more predictable sales and earnings and for their role in supplying non-perishable food supplies, paper products, and cleaning products.
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