UPDATE 2-P&G appears back on track with CEO Lafley's return
Aug 1 (Reuters) - Procter & Gamble Co's quarterly profit fell less than expected and this year's earnings should rise at least as much as last year, indicating the world's largest household products maker is fixing its problems with A.G. Lafley back in charge.
Net profit in the fourth quarter dropped nearly 50 percent, P&G said on Thursday, but core earnings per share, which strip out various factors and are more closely watched by Wall Street, fell 4 percent.
"To me, this is the quarter that they really needed to have. It wasn't a blowout quarter, but I don't think anybody expected that," said David Blount, co-portfolio manager at Eagle Asset Management, which owned more than 350,000 P&G shares at June 30.
P&G stock rose nearly 2 percent to $81.86 in early trading. Through Wednesday, the shares had climbed 2 percent since Lafley was brought back as chairman and chief executive in late May.
Since Lafley replaced Bob McDonald, Procter, the maker of a wide variety of goods like Gillette razors and Pampers diapers, has put the focus on four business sectors as it tries to expand more quickly around the world.
On Thursday, P&G said it would no longer give quarterly forecasts, instead providing an annual forecast and updating that as the year progress. The company is trying to turn investor focus toward longer-term growth.
Lafley said he has done a "deep dive" over the past two months to see what P&G needs to accomplish. The company competes against a wide range of smaller rivals, such as Unilever
and Colgate-Palmolive Co.
"We know we're not winning like we know we can," Lafley told analysts and investors on a conference call.
"We simply have to execute better," he added later, noting the company will invest selectively.
For fiscal 2014, which began in July, P&G forecast core earnings per share rising 5 percent to 7 percent. That includes an expected hit of 6 percentage points from foreign exchange. Core earnings rose 5 percent last year.
The analysts' average fiscal 2014 estimate of $4.32 per share implied a growth rate of about 6.7 percent.
P&G expects organic sales, which strip out the impact of currency changes, acquisitions and divestitures, to rise 3 percent to 4 percent as the overall market grows at about 3.5 percent.
The 2014 forecast "provides relief" and "alleviates recent investor concerns" that P&G would cut its outlook with Lafley back in charge, said SunTrust Robinson Humphrey analyst Bill Chappell.
Blount said the sales forecast looked conservative since P&G usually talks about beating the market, not performing like the rest of the industry. While cost savings and improved productivity are necessary, "sales growth is the key here," he said.
P&G earned $1.88 billion, or 64 cents per share, in the fiscal fourth quarter, down from $3.63 billion, or $1.24 per share, a year earlier.
Core earnings per share fell to 79 cents from 82 cents. Still, that beat P&G's forecast of 69 cents to 77 cents and analysts' average estimate of 77 cents, according to Thomson Reuters I/B/E/S.
Sales rose 2.2 percent to $20.66 billion, topping analysts' average target of $20.55 billion.