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PG Crushes Modest EPS Growth Estimates

PG delivered F2Q13 results with EPS of $1.22 versus a guidance range of $1.07 - $1.13 and The Street at $1.11 with better than anticipated organic sales growth of 3% (2% volume, 2% price, -1% mix).  The company saw EPS tailwinds from continued cost savings initiatives, better commodity comparisons (gross margin improved +110bps y/y), and a more favorable tax rate ($0.04 benefit).

PG raised the full-year organic sales outlook to +3-4% from +2-4% and also raised the 2013 core EPS range to $3.97-$4.07 from $3.80-$4.00.

We think this is a big name stock that people missed and will want to own. As we said in our earnings preview note on 1/21, “our experience is that names that beat and raise go higher, particularly in the case of multi-year laggards such as PG.”

We can still see some upside to earnings as PG navigates fiscal 2013 and while valuation isn't particularly compelling, we think this is a name that investors can't afford to miss, and will chase.

Robert Campagnino

Managing Director

Matthew Hedrick
Senior Analyst