U.S. News

Procter & Gamble Profit Rises 19%, Boosts Buybacks Plans


Procter & Gamble posted a better-than-expected 19% rise in quarterly profit Friday, helped by cost controls, and announced a sharp acceleration of share repurchases.

But the maker of Gillette razors, Tide laundry detergent and Pampers diapers also forecast earnings below Wall Street expectations in the fiscal year begun July 1.

P&G Earnings Reaction

While the fiscal 2008 guidance is "somewhat disappointing, (it) is likely conservative," said CIBC World Markets analyst Joseph Altobello, who rates P&G "sector outperformer."

Profit was $2.27 billion, or 67 cents per share, in the fiscal fourth quarter ended June 30, up from $1.9 billion, or 55 cents per share, a year earlier.

"The plan for next year is intact," said Chief Financial Officer Clayton Daley, in an interview on CNBC's "Squawk Box."

According to Daley, the Cincinnati maker of Tide detergent, Pringles potato chips and Pampers diapers, plans to accelerate its restructuring program, which will result in $300 million to $400 million in additional costs that will be absorbed within the company's earnings. P&G no longer records restructuring costs, he said.

In early June, P&G said it expected to earn 64 cents to 66 cents per share. Analysts, on average, expected 66 cents a share, according to Reuters Estimates.

P&G shares rose less than 1% to $63.70 in early electronic trading.

The company said it plans to repurchase $24 billion to $30 billion of its stock over the next three years, at a rate of $8 billion to $10 billion per year. In fiscal 2007 it spent $5.6 billion on share buybacks.

Fourth-quarter sales rose 8% to $19.3 billion, topping analysts' average forecast of $19.12 billion. P&G had forecast a 6 percent to 7% rise. Products such as Gillette Fusion razors, Tide Simple Pleasures detergent and Crest Pro-Health toothpaste and rinse drove the growth.

Organic sales, which exclude acquisitions and the impact of foreign exchange, rose 5%. The company had forecast growth of 5% to 6%.

Volume, a measure that factors out foreign currency and price fluctuations, rose 5%, driven by double-digit growth in developing regions. P&G said volume growth and cost savings more than offset commodity cost increases during the quarter.

"Net net, we expect investors to react favorably to a quarter that had tough comparisons), a slower U.S. consumer environment and commodity challenges but still delivered solid top and bottom line," said Morgan Stanley analyst Bill Pecoriello, who has an "overweight" rating on the shares.

The company has said it expects a tough competitive environment in the current fiscal year as its rivals, such as Colgate-Palmolive and Kimberly-Clark, spend their restructuring savings to promote their brands. P&G is funding its plans internally instead of taking restructuring charges.

P&G forecast fiscal 2008 earnings of $3.44 to $3.47 per share. Analysts' average forecast is $3.48. The company expects organic sales growth of 4% to 6%, and total sales growth of 5 percent to 7%.

For the current fiscal first quarter, it forecast earnings of 88 cents to 90 cents per share, while Wall Street expects 91 cents. The company expects organic sales to rise 4% to 6% during the quarter, and total sales to grow 6% to 8%.

Shares of Cincinnati-based P&G fell 3.1% during the April-June quarter, while the Dow Jones industrial average, of which it is a component, rose 8.5%.