Analyse aandeel Procter & Gamble

Procter & Gamble heeft een portefeuille met leidende merken in het segment huishoudelijke artikelen en producten voor lichaamsverzorging. Deze producten zijn essentieel voor retailers om mensen naar hun winkel te krijgen. (Engelstalig rapport)

Erin Lash, CFA 03 september, 2014 | 14:12

INVESTMENT THESIS

Procter & Gamble is still working to right its ship. The firm previously entered too many new markets (particularly emerging markets, where competitors already have a leg up) too quickly, and new products failed to resonate with consumers, as evidenced by its languishing market share. However, P&G's recent announcement that it intends to shed 90-100 brands--more than half of its existing brand portfolio, which in aggregate posted a 3% sales decline and a 16% profit reduction the past three years--indicates it is parting ways with its former self, looking to become a more nimble and responsive player in the global consumer products arena. We view this as a particularly important trait given the stagnant growth emanating from developed markets and the slowing prospects from emerging regions.

Even a slimmed-down version of the leading global household and personal care firm will still carry significant clout with retailers, and we think these actions will only enhance P&G's brand intangible asset and its cost advantage, which together form the basis for our wide moat. The 70-80 brands it will keep (including 23 that generate $1 billion-$10 billion in annual sales, and another 14 that account for $500 million-$1 billion in sales each year) already account for 90% of the firm’s top line and 95% of its profits. As such, we don't anticipate P&G will sacrifice its scale edge but will be able to better focus its resources (both personnel and financial) on its highest-return opportunities. In addition, we doubt the firm will shy away from offering premium-priced products, as management has emphasized that two higher-priced offerings (Oral B and SK-II) continue to outperform others in the space.

These actions build on the firm's $10 billion cost-saving initiative designed to lower costs through reduced overhead, lower material costs from product design and formulation efficiencies, and increased manufacturing and marketing productivity. Overall, we think the combination of these efforts will enable P&G to up its core brand spending (behind product innovation and marketing support), which is critical given the ultra-competitive landscape in which it plays.


VALUATION

Economic Moat   Fair value   Stewardship Rating   P&G
Wide   USD 93.00   Standard  
Moat Trend   Uncertainty   Sector  
Negative   Low  

Consumer Defensive - Consumer Packaged Goods


BULLS

  • Even efforts to rightsize its brand mix won't change the fact that P&G operates with a portfolio of leading brands across the household and personal-care arena, making its products essential for retailers to drive traffic in their stores.

  • The firm's $10 billion cost-cutting efforts look to trim the size of its workforce, localize the sourcing of its raw materials and the development of its products, and reduce its manufacturing platforms.

  • With a greater percentage of sales coming from international markets, P&G has been able to reduce its ongoing long-term tax rate.

 

 

BEARS

  • Global market growth for P&G's categories is roughly 3% on a dollar basis, and we think it would be tough for the firm to sustain a top line that's more than 1%-2% faster than this, given the large base of sales it already commands.

  • P&G needs to improve its go-to-market execution. Some of its new product launches resulted in supply constraints and out-of-stock situations.

  • We question the degree to which recent revenue growth reflects the benefit of rolling back prices in some product segments to narrow the price gap with competitors and enhance competitive positioning.

 

 

 

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Effecten genoemd in dit artikel

Naam effectPrijsChange (%)Morningstar Rating
Nestle SA101,02 CHF-0,49
Procter & Gamble Co112,33 USD1,02
Reckitt Benckiser Group PLC6.349,00 GBX2,25
Unilever NV DR54,39 EUR0,41

Over de auteur

Erin Lash, CFA  Erin Lash, CFA, is a senior stock analyst with Morningstar.