Procter & Gamble Lowers Guidance. Again.

One of Wall Street’s most respected blue chips announced more bad news today. Procter & Gamble ($PG) had previously told us to expect fiscal fourth-quarter earnings to range between 79 cents and 85 cents per share. Now P&G says that range is 75 cents to 79 cents per share.

The market is not pleased as the shares are currently down about 3.3% today. Procter & Gamble is already in Wall Street’s doghouse. In April, they delivered lousy earnings and seemed to have a litany of excuses. Analysts were quick to point out that P&G’s competitors seemed to be doing a good job of avoiding these issues:

“It strikes me that from an execution perspective, P&G isn’t delivering,” said Citigroup analyst Wendy Nicholson.

“There’s so many excuses: Not our fault, competition didn’t follow the pricing; not our fault, Venezuela changed; not our fault, the developed consumer isn’t robust,” she continued. “And I just say to myself, God, where is the mea culpa?”

In April, P&G lowered their full-year forecast (which ends at the end of June) from $3.93 – $4.03 per share to $3.82 – $3.88 per share. Today’s news brings the range down to $3.78 – $3.82 per share.

For 2012, P&G expects core earnings to rise by mid-single digits. Let’s say that means 5%. If the company makes $3.80 per share this year, then we should expect earnings of $3.99 per share for 2013. Wall Street had been expecting $4.11 per share. My simple stock valuation method gives P&G a fair value of $46 per share which means that the current price is more than 30% too much. Stay away from P&G.

Posted by on June 20th, 2012 at 11:35 am


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