Earnings Preview: Procter & Gamble

CINCINNATI - Procter & Gamble Co., the world's largest consumer products maker, reports earnings for its first quarter before the market opens Thursday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: P&G has seen sales and profits slump in the past year as consumers bought less or traded down in the recession, and the company said early in the quarter that began July 1 that it expected sales to fall again.

However, the maker of such products as Tide detergent, Pampers diapers and Pantene shampoo expects things to pick up in the second quarter that began this month, and has tried to fuel its rebound by cutting prices, stepping up promotions and adding cheaper versions of some products.

This will be P&G's first quarterly earnings under Bob McDonald as CEO. The P&G veteran moved up from chief operating officer July 1, while A.G. Lafley stays on as chairman after nine years as CEO.

McDonald has deep experience in emerging markets and has targeted developing nations, led by China and India, for most future growth. He told shareholders at the company's annual meeting Oct. 13 he wants to add a billion new customers around the globe over the next five years.

The company in August announced the $3.1 billion sale of its prescription drug business to Warner Chilcott PLC, the latest adjustment of its broad portfolio. P&G has also sold off Folgers coffee and several smaller businesses in the past year while buying the upscale skin-care line Zirh and men's grooming business The Art of Shaving.

P&G declined to comment on reports last week it was in talks to buy Sara Lee Corp.'s household products unit, mainly the air freshener business.

BY THE NUMBERS: Analysts polled by Thomson Reuters on average expect P&G to report it earned 99 cents per share on sales of $19.83 billion. In the same period a year earlier, it reported earnings of $1.03 a share on $22 billion.

ANALYST TAKE: Citi Investment Research analysts Wendy Nicholson last month upgraded P&G stock to "Buy" from "Hold," seeing a "fire in PG's belly" with its commitment to build market share.

"P&G is readying itself to become more aggressive in order to win back lost market share," she wrote in a client note.

WHAT'S AHEAD: Analysts will watch for signs of P&G's expected year-end sales improvement. The first-quarter numbers could indicate whether trade-down tendencies among consumers are slowing down and how shoppers are responding to launches of new premium items such as Tide Stain Release laundry additives and the Bounce fabric softener dryer bar.

Analysts are also keeping an eye on the buying-and-selling front.

Analyst Ali Dibadj with Sanford C. Bernstein & Co. has said he thinks P&G would be interested in buying a beauty products company to expand its lineup and add strength in emerging markets. He and other analysts also think P&G could sell some product lines such as Duracell batteries and Pringles snacks.

STOCK PERFORMANCE: P&G shares opened the first quarter at $51.47 and climbed to $57.92 by the quarter's end. They have traded in a narrow range around $57-$58 since then. Over the past 52 weeks, they have traded between $43.93 and $66.82.

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