After Prolonged Proxy Fight, P&G Results Give Ammo to Both Sides

Investors waiting for insight on who was right in the protracted Procter & Gamble-versus-Nelson Peltz battle will have to wait a while longer. 

P&G’s latest quarterly results for profit and sales were largely in line with expectations. But slow revenue growth will continue to provide fuel to critics such as the billionaire investor, who argue the company is being held back by an unwieldy structure and a lack of innovation. Markets appeared to agree, driving P&G shares down Friday by the most intraday in almost a year.

“Overall we believe the result is disappointing relative to expectations, with sales growth most notable,” Mark Astrachan, an analyst at Stifel Financial Corp., said in a note Friday.

At the same time, the report gives ammunition to the company, which says its turnaround strategy is working — even if its initial pace is lumbering. Sales growth of 1 percent will accelerate going forward after the company leaves its toughest comparison period behind, executives said.

Chief Executive Officer David Taylor said margins will also improve in coming quarters. The Cincinnati-based company maintained its guidance of organic sales growth in a range of 2 to 3 percent for fiscal 2018.

Improving Trends

“We delivered organic sales growth in a decelerating global market and against a relatively strong base period,” he said in a statement. “Market share trends continue to improve, with more of our top brands and countries holding or growing share.”

P&G is still trying to discern why growth in the U.S. hasn’t been picking up pace, Chief Financial Officer Jon Moeller said on an earnings call. But investors he’s spoken with have endorsed P&G’s turnaround plan, though they’d like to see faster progress, he said.

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Profit was $1.09 a share, excluding some items, topping the consensus estimate of $1.08. Overall organic sales rose just 1 percent. Growth in the beauty, health care and fabric and home care segments offset declines for grooming and baby, feminine and family care products.

Shares of the maker of Tide, Pantene and Pampers fell as much as 3.5 percent to $88.35 on Friday — the most since Nov. 10. P&G shares had risen 8.9 percent this year through Thursday’s close, trailing the 14 percent by the S&P 500 over the same period.

Tougher Market

The growth of years past has been elusive for many consumer-products companies. Pressure from private-label brands and retailers’ push for cost cuts have weighed on manufacturers, Andrea Teixeira, an analyst at JPMorgan Chase & Co., said in a note this week. P&G’s results in particular are under scrutiny after Peltz highlighted market share losses and sales performance, she said.

P&G says that Peltz’s criticisms are outdated and the company has acknowledged its problems and is targeting them. 

After three months of tit-for-tat press releases from the two sides, preliminary results showed that P&G prevailed earlier this month in denying Peltz a seat — but by a margin of less than 1 percent. Peltz has challenged the results and has argued that he deserves a board seat regardless of the actual count.

— With assistance by Scott Deveau