Jefferies: Procter & Gamble Won't Look Much Better Than This

Procter & Gamble Co PG shares suffered a steep stumble through the first four months of the year, but the second quarter saw some long-awaited relief.

Unfortunately, the recovery isn’t expected to last much longer.

The Rating

Jefferies analyst Kevin Grundy downgraded Procter and Gamble to Hold and cut his price target from $83 to $79.

The Thesis

Grundy anticipates challenges to P&G’s market share and top line in 2019. As such, he cut his bottom-line estimate 6.5 percent.

“Our prior constructive thesis had been predicated on an inflection in organic sales,” the analyst wrote in a Monday note. “However, slowing market growth, EM [emerging market] volatility, US retail difficulties, the stronger USD, and pricing challenges should drive estimates lower again at P&G.”

He deemed the stock’s current price “reasonable” and even noted potential for the 18 times price-to-earnings ratio to drop to 17.5 times.

Nonetheless, Jefferies recognizes the distant possibility of improvement. Efforts by activist investor Nelson Peltz, whose Trian holds a seat on the board, could drive strategic changes in the form of a segment sale, restructuring or major merger.