- Raymond James analyst Olivia Tong reiterated an Outperform rating on the shares of Procter & Gamble Co PG and raised the price target from $165 to $170.
- For PG’s 3QF23, the analyst models 5% y/y organic sales growth, driven by pricing +9 points, offset by a 4% decline in volume.
- The price forecast is flat sequentially as it assumes no incremental price action versus FQ2, while the volume forecast could prove conservative if sell-in is more closely aligned to sell-through, the analyst said.
- Supply shortages in Feminine Care and Fabric Care are improving, and PG is investing in LT capacity, including a Fabric Care facility in Arizona slated for 2025 opening., added the analyst.
- The analyst thinks as 2023 progresses, sales growth will become more dependent on volume as price actions begin to lap.
- The analyst models gross margins down 130 basis points y/y and operating margins down 110 basis points, as the impact of decelerating input costs is more material in 2H.
- As of last quarter, PG forecasted FY23 after-tax headwinds of $2.6 billion from commodities/freight and $1.3 billion from FX, which should see some relief, the analyst added.
- The analyst raised the EPS estimate by $0.02 to $5.83.
- The target price reflects the defensiveness of PG’s portfolio, improved execution over the last several years, steady and leading market shares, and balanced revenue and profit growth, said the analyst.
- The strategy and portfolio changes over the last several years have clearly paid off, driving improved top and bottom-line growth.
- Near-term macro headwinds present risk, but PG’s top-tier pricing power and price-laddered portfolio across a relatively non-discretionary portfolio should allow it to hold share, added the analyst.
- The company’s robust cost savings initiatives should drive faster earnings growth. All these factors, the analyst feels, should allow PG to continue trading at a premium to its peers.
- Price Action: PG shares are trading higher by 0.30% at $150.23 on the last check Friday.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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