Blue-chip dividend aristocrat The Procter & Gamble Company (PG - Get Rating) provides branded consumer packaged goods to consumers in North and Latin America, Europe, the Asia Pacific, Greater China, India, the Middle East, and Africa. It operates in five segments- Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. 

On June 8, 2022, industry giants PG and Microsoft Corp. (MSFT) announced their new multi-year collaboration. The companies expect this partnership to be revolutionary in the emerging market, like automated manufacturing, which aims to foster productivity.

In addition, PG is also taking steps for holistic business development. On June 9, 2022, PG announced a significant expansion of its environmental sustainability efforts to preserve water resources and make water available to all and sundry.

Colin Strong, Corporate Water Stewardship Lead, World Resources Institute Aqueduct Program, said, “P&G’s water target adds a first-of-its-kind ambition to address water consumption and offers a roadmap for others to adopt targets in the face of our shared water problems.”

PG has raised payouts every year since Dwight D. Eisenhower was president. Its annual dividend of $3.65 yields 2.68% on prevailing prices. The company’s dividend payouts have increased at a CAGR of 6.7% over the past three years and a CAGR of 5.5% over the past five years. Its four-year average yield is 2.56%.

Over the past year, PG has gained 2.5% to close the last trading session at $136.37. However, the stock has lost 3.8% over the past month. In addition, Wall Street analysts expect the stock to hit $167.29 in the near term, indicating a potential upside of 22.7%.

Here is what could shape PG’s performance in the near term:

Strong Financials

For the third quarter ended March 31, 2022, PG’s net sales increased 7% year-over-year to $19.38 billion. The company’s net earnings came in at $3.35 billion, up 2.6% year-over-year, while its EPS came in at $1.33, up 5.6% year-over-year. Also, its operating income soared 6.3% year-over-year to $4.02 billion.

Solid Profit Margins

PG’s trailing-twelve-month gross profit margin of 48.49% is 45.2% higher than the industry average of 33.39%. Its trailing-twelve-month EBIT margin and EBITDA margin of 23.45% and 26.96% are also higher than the industry averages of 8.52% and 12.14%, respectively.

Furthermore, PG’s trailing-twelve-month net income margin of 18.33% is 268.1% higher than the industry average of 4.98%.

Favorable Analyst Expectations

PG’s revenue is expected to increase 5.3% year-over-year in the current year and 3.9% next year. Its EPS is estimated to increase 3.2% year-over-year in the current year and 6.3% next year. Moreover, its EPS is expected to grow 5.3% per annum for the next five years. It surpassed EPS estimates in each of the trailing four quarters.

Among the fourteen Wall Street analysts that rated PG, nine rated it Buy, while five rated it Hold.

POWR Ratings Reflect Promising Outlook

PG has an overall rating of B, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

It has a B grade for Growth and Quality, consistent with its strong financials in its last reported quarter and higher-than-industry profit margins, respectively.

The stock also has a B grade for Stability, in sync with its beta of 0.39.

In the 61-stock Consumer Goods industry, PG is ranked #6. The industry is rated C.

Click here for the additional POWR Ratings for PG (Value, Momentum, and Sentiment).

View all the top stocks in the Consumer Goods industry here.

Bottom Line

PG has raised its dividend payouts for 65 straight years. Moreover, PG’s revenue has grown at a CAGR of 5.9% over the past three years, while its EPS has increased at a CAGR of 10.8%. Also, given its high profitability, I think PG is an ideal investment to hedge against the ongoing market fluctuations.

How Does The Procter & Gamble Company (PG) Stack Up Against its Peers?

While PG has an overall POWR Rating of B, one might consider looking at its industry peer, Mannatech, Incorporated (MTEX - Get Rating), which has an overall A (Strong Buy) rating, and Levi Strauss & Co. (LEVI - Get Rating), which has an overall B (Buy) rating.

PG shares were trading at $138.92 per share on Wednesday afternoon, up $2.55 (+1.87%). Year-to-date, PG has declined -14.14%, versus a -20.71% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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