P&G reports $7.9B profit, ups key sales outlook
Procter & Gamble reported a $7.9 billion second-quarter profit Friday, a 146 percent increase from the same period a year ago.
Two-thirds of P&G's profit total, about $5.3 billion worth, came from the divestiture of beauty brands. Total sales declined 0.3 percent to nearly $16.9 billion.
The quarter's results were the first posted by P&G reflecting its slimmer product portfolio, featuring about 65 brands. In early October, the company completed a split off with nearly a third of its beauty business. The challenge going forward is for P&G to reignite sales growth at its remaining core businesses of Tide detergent, Gillette razors, Pampers diapers and other household staples.
Organic sales, a closely watched metric that excludes the impact of foreign exchange, acquisitions and divestitures, rose by 2 percent.
P&G reported earnings per diluted share at $2.88 and core earnings at $1.08. Wall Street expected the company to report core earnings of $1.06.
P&G shares shot up as high as $3.27, or 3.9 percent, to $87.97 in Friday morning trading.
Wall Street analysts had expected P&G to report a $3 billion profit excluding one-time items on sales of $16.8 billion, according to Bloomberg. Last year, the company reported a $3.2 billion profit on sales of $16.9 billion for the second quarter.
"We delivered good results in the second quarter in a difficult operating environment," said CEO David Taylor, in a statement. "Stronger top-line performance in the first half of the fiscal year is enabling us to increase our organic sales growth outlook for the full year."
The company's improved performance was driven by a 1 percent increase in sales volume, while pricing and product mix were flat. While selling, general and administrative expenses increased 2 percent to $4.7 billion, profit margins increased and the effective tax rate declined.
Several analysts applauded the latest results, but added they wanted to see more improvement.
"(Second quarter) earnings are probably the most solid set of numbers we have seen from P&G in some time," wrote Barclays analyst Lauren Lieberman in a Friday note to investors. "While there is still plenty of work to be done, it is surely encouraging to see the company bump up its organic revenue forecast for the year."
Still, Lieberman noted the company is grappling with inflation in several of its markets and noted P&G's flat pricing.
"We think this indicates P&G is making solid progress improving share trends, though the company is still likely growing modestly below global category growth of 3 percent to 3.5 percent," wrote Stifel analyst Mark Astrachan on Friday.
P&G has said over time it wants to grow organic sale slightly above growth rates in the markets it does business.
A skeptical SunTrust analyst William Chappell noted Friday P&G's quarter benefited from $203 million in lower taxes.
"Adjusting for the lower tax rate, it was a roughly in-line EPS quarter, but we believe investors were mostly focused on the organic growth," Chappell wrote. "Results are a step in the right direction but we, and the Street, had admittedly low expectations."