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Procter & Gamble posted a solid earnings report on Tuesday, but the stock rose lower on Wednesday.
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Procter & Gamblesay
solid financial results may not be enough to keep some investors and analysts on their stocks.
Citigroup downgraded the stock on Wednesday, the day after the consumer goods producer reported better-than-expected fiscal third-quarter earnings. Procter & Gamble shares were slightly lower in recent trading, 0.7% lower at $ 136.77 in recent trading. The stock has fallen 1% so far to 15.4% in the last 12 months.
Analyst Wendy Nicholson lowered her rating on Procter & Gamble (ticker: PG) to Neutral from Buy and lowered her price target to $ 150 from $ 165. She noted that the results were above expectations. But the company’s planned price increases and other reactions to higher input costs make her feel that ‘the next few quarters are likely to see increasing pressure and that the results could be bumpy,’ she wrote.
P & G’s price increases on some of its portfolios will only take effect in September, so commodity inflation will put the company under pressure for the next few months. The company is also facing less favorable exchange rates and difficult comparisons with 2020, when the pandemic increased sales. Nicholson also warns that some emerging markets where P&G is operating appear to be deteriorating before getting better, without being very visible in a timeline for recovery.
These factors could limit the company’s leadership and weigh the fiscal outlook for 2022, Nicholson warns.
On top of that, the shares look relatively cheap at a premium of 6% compared to the
S&P 500,
compared to 25% historically – headwind headwind is unlikely to expand the valuation.
That said, Nicholson still believes the company is a good long-term stakeholder, adding that it is well-positioned in some key markets and categories. She emphasizes the strong dividend growth and cash flow, as well as the ‘fantastic record of innovation and marketing’. But for now, she says it’s safer to wait it out along the sidelines.
Write to Teresa Rivas by [email protected]