Cleanliness may be next to godliness for many out there—especially these days—and that's driving some big new wins in the market. This is especially true for Procter & Gamble (NYSE:PG), who recently rolled out its latest quarterly earnings report and gave investors a whole lot to smile about. Better yet, it's poised to offer plenty more to smile about in the quarter to come.
Who Knew a Pandemic Would Make Everyone Clean House?
The numbers for Procter & Gamble's fiscal first quarter were nothing short of dazzling. Revenue for the quarter was up fully 9%, and handily beat estimates posted. While a Refinitiv study expected $1.42 per share in earnings to come out, the company managed to bring out $1.63. That same study expected $18.38 billion in revenue, and the company generated $19.32 billion instead.
The grosses were fantastic, and the net didn't do half bad either. Net income came in at $4.28 billion, which was well above the figures posted last year at this time, $3.59 billion. The figures were every bit as good for organic revenue, which pulls out a few extraneous measures like issues of foreign currency and the impacts created by losing or gaining new companies via acquisitions or similar activity. That too was up a healthy 9%.
Gains Everywhere You Look
Virtually every component of Procter & Gamble's business saw gains in the quarter, according to reports. The largest market the company has, North America, saw a hefty 16% gain in sales over the quarter, followed closely by China, which posted a 12% gain. Based on word from the company's COO, Jon Moeller, consumers are not opting for lower-priced alternative brands, despite recent setbacks in establishing new stimulus programs and an economy that's a bit on the uncertain side these days.
Geographical gains were readily noticeable, and so were gains by product sector. Fabric and home care products like Tide and Comet made the biggest gains, up 14% for the quarter. Home care was the breakout star within that product market, with its organic sales up 30%. Healthcare product sales also spiked, as products like Crest, Pepto-Bismol and Vicks gained ground. The beauty segment—which might have seen some losses amid people going out less for work or entertainment—even gained 7% thanks in part to the launch of new hand soap and hand sanitizer products.
In what may have been the biggest surprise of the study, even the grooming business saw a 6% jump. There were many who thought this sector would take hits at some point, thanks to the growth of stand-alone grooming operations and subscription services like Dollar Shave Club, a Unilever (NYSE:UL) product. Procter & Gamble noted that grooming took off thanks to an increased demand for “dry shaving and styling products” as well as improved innovation overall.
The Future Looks Bright Too
Just to round things out, the company offered up future guidance suggesting these gains were no pandemic-fueled fluke; the company raised its guidance on fiscal 2021, going from a previous forecast of 1% to 3% growth and now suggesting sales will grow between 3% and 4% for the year. Organic revenue expectations saw similar gains, going from between 2% and 4% gains to between 4% and 5% gains.
Our latest research suggests good reasons to buy in as well. The current consensus figure of three “hold” ratings and 12 “buy” ratings makes it perfectly clear that this is a worthwhile stock to pick up, and the fact that the price target has increased four times in the last six months certainly doesn't hurt matters either. Given that five separate analysts have increased the price target for October, so far, only underscores the potential value seen here.
With the pandemic still playing a part, and people increasingly opting to stay home, the demand for home cleaning products is likely to remain brisk for some time to come. People will not only want to make their home feel more welcoming but also safer. Cleaning helps on both of those points, which should put a lot of extra weight into Comet and Tide. Personal cleaning also gains here, and with Procter & Gamble selling a little something for all of those points—especially familiar brand names which should add an extra note of comfort to the proceedings—the company should be a worthwhile buy for investors looking for comfortable returns as well.
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