Procter and Gamble Posts Strong Earnings, Shares Rise

Procter and Gamble PG reported fiscal second quarter earnings Friday before the market open beating analyst expectations on both the top and bottom and lines. Shares rose slightly in the pre-market following the release.

For the fiscal second quarter ended December, Procter and Gamble reported core earnings per share of $1.22, well better than analyst forecasts of $1.11 per share. Also, revenue was better than expected, as the company reported second quarter revenue of $22.2 billion compared to forecasts of revenue of $21.91 billion. This beat in revenue included a 1 percent impact from negative foreign exchange movements as well.

There were two non-core items that were omitted from core earnings per share in the quarter that investors should consider. Procter and Gamble took a $0.05 per share charge for restructuring costs in the quarter and also recorded a $0.21 per share charge in the quarter following the buyout of a remaining stake of a joint venture in Europe.

Notably, the company increased organic sales 3 percent in the quarter, at the top-end of company guidance. Further, organic sales growth was broad-based across product lines with every product line seeing sales growth of at least 2 percent in the quarter vs. the same period in the prior year. Also, gross margins increased 110 basis points in the quarter and operating cash flow was strong.

Procter and gamble raised its core earnings per share guidance for the fiscal year 2013 to $3.97 to $4.07, up three percent to up six percent versus prior year core EPS of $3.85. The company also raised its GAAP earnings per share guidance to a range of $4.04 to $4.14, equating to growth of 10 percent to 13 percent versus prior year GAAP EPS of $3.66. The increase reflects higher core earnings and an increase in the non-core holding gain resulting from P&G's purchase of a European joint venture. The EPS range also includes non-core restructuring charges of $0.15.

"Our second quarter results were at the high end of our expectations on the top-line and well ahead of forecast on operating profit, earnings per share and cash flow," said Chairman, President, and Chief Executive Officer, Bob McDonald. "Global market share trends improved as we continued to implement our growth strategy and made very good progress against our productivity and cost savings goals. Our strong first half results have enabled us to raise our sales, earnings and share repurchase outlook for the fiscal year, while we strengthen investments in our innovation and marketing programs."

Procter and Gamble shares rallied nicely in the pre-market, gaining 1.72 percent to $71.63. Should the stock open at or near these levels, it would represent a new 52-week high for the stock.