Procter & Gamble Bulls Reassured By A Strong Q1

Jefferies thinks Procter & Gamble PG's strong Q1 results demonstrated its bullish view on the stock. The firm maintained its Buy rating and $98 target price, implying upside of more than 12 percent.

The company delivered core EPS that topped estimates by $0.05 while revenue came in line with the consensus. However, the key factor is that organic sales advanced 3 percent compared to the Street expectations of 2.4 percent.

The brokerage listed the following five key takeaways from the conference call:

• Expects return to market growth in the fourth quarter of fiscal year 2017 citing the current 3–3.5 percent market growth pace.
• Sees quarterly growth to be lumpy with Q2 and Q3 expected to be below Q1.
• Emerging markets grow 6 percent, with 4 percent and 2 percent coming from volume and price mix respectively. Developed markets delivered 2 percent growth.
• FabriCare grew 7 percent in North America in the first quarter. However, the company's selective portfolio management dragged down in emerging markets.
• Trends in China are showing improvements.

In a note, Analyst Kevin Grundy said, "Macros remain volatile and investment in FY17 will constrain EPS growth, though we continue to like the set-up here with room for P&G to re-rate as org sales growth returns to industry growth rates. Maintain $98 PT and FY17-19 EPS ests., though see conservatism in P&G's guide."