P&G Q4 & Full-Year 2020 Earnings Results

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.

This material is provided by Schmitt Wealth Advisers for informational purposes only.  It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product.  Opinions expressed by Schmitt Wealth Advisers are based on economic or market conditions at the time this material was written.  Economies and markets fluctuate.  Actual economic or market events may turn out differently than anticipated.  Facts presented have been obtained from sources believed to be reliable.  Schmitt Wealth Advisers, however, cannot guarantee the accuracy or completeness of such information.  Past performance may not be indicative of future results.

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