If the approaching earnings season for consumer staple companies looks anything like earnings day for Procter & Gamble (PG), then many stocks in the sector could get one more leg higher.
Shares of the Tide laundry detergent and Gillette shave care owner popped nearly 2% on Wednesday followed another blowout quarter and upbeat outlook, both powered by changing consumer habits during the COVID-19 pandemic. The company saw organic sales growth in all business segments, paced by a 12% gain in the fabric care business as households do more dish and surface cleaning seeing as they are at home 24/7.
“We're building on strong momentum that we built over the last number of years. And that's continuing through the COVID environment,” P&G Vice Chairman and CFO Jon Moeller told Yahoo Finance.
Here’s how P&G performed compared to Wall Street estimates for its second fiscal quarter.
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Net Sales: $19.7 billion vs. estimates for $19.23 billion
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Core Diluted EPS: $1.64 vs. estimates for $1.51 a share
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FY21 Outlook: Organic sales growth of +5% to +6% and core EPS growth of +8% to +10%
What’s more, P&G raised its full-fiscal year sales and profit outlooks, and said it will repurchase $10 billion in stock. Previously, the company planned to buy back $7 billion to $9 billion in stock in its fiscal year, but Moeller says P&G has gained added confidence in the direction of the business.
The main question Wall Street has right now on consumer staples is how they will, as the industry jargon goes, “comp the comp” in the second half of 2021. In other words, can consumer staples still show strong sales and profit gains versus a year ago at the height of the pandemic as people worldwide get back to some form of new normal after inoculation. That return to normal could mean fewer purchases of a range of consumer staples from frozen food to laundry detergent and a related growth slowdown at consumer staples.
Shares prices in the consumer staple patch reflect the angst, as Yahoo Finance has reported.
P&G’s Moeller is well aware of the concerns on the Street, but remains confident the business is in a new steady state.
“We're looking forward to serving what we believe will be a forever altered consumer need for products that help them with health hygiene and a clean home. There are habits that are being formed during this unfortunately long COVID period that we believe will continue to some degree post COVID,” Moeller said.
P&G is the first in the space to poke holes in Wall Street’s thought bubble. Others could soon follow.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Julia La Roche is a correspondent for Yahoo Finance. Follow her on Twitter.
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