4 Reasons Why Bank Of America Added Procter & Gamble To Its US1 Lists

Less than a month after upgrading the stock, Bank of America added Procter & Gamble Co PG to its US1 List of top American stocks to buy. On Tuesday, analyst Olivia Tong said there are plenty of positive catalysts for P&G stock, and recent weakness in the stock could be a buying opportunity for long-term investors.

In the most recent quarter, P&G reported organic revenue growth of 4 percent, beating expectations and delivering its best performance in nearly five years. Tong said Nielsen data suggests P&G’s momentum continued into the current quarter, with tracked channel sales up 3 percent. Leading Proctor customers, including Walmart Inc WMT, Target Corporation TGT and Costco Wholesale Corporation COST, have also been tracking for strong quarters, which bodes well for P&G.

Tong said there are four primary drivers for the bullish P&G thesis:

• 1. Strong recent organic sales momentum.
• 2. Positioning as a stable, defensive play in an increasingly volatile market.
• 3. Stable, and improving market shares after a period of share declines.
• 4. Active managers are underweight, making the stock a potential rotation winner.

“More broadly, following some years of divestitures, PG now has a tighter portfolio of leading brands more responsive to innovation and marketing spending in our view,” Tong wrote in Tuesday's note.

During the past four U.S. recessions, P&G shares have outperformed the S&P 500 by an average of about 25 percent. Tong said Bank of America is not predicting a recession in 2019, but investors looking for a defensive play that could perform well regardless of the rest of the market, P&G is a good choice.

Bank of America has a Buy rating and $108 price target for P&G stock. Shares traded around $92.41 at time of publication.

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Photo courtesy of Procter & Gamble.