P&G’s products were popular earlier in the Covid-19 pandemic.
Joe Raedle/Getty Images
Investors have been wary of consumer staples stocks lately, given worries about high inflation and difficult comparisons to pandemic-boosted sales in recent years. Yet Raymond James argues that
Analyst Olivia Tong initiated coverage of Procter & Gamble (ticker: PG) with an Outperform rating and $175 price target. “Strategy and portfolio changes in the last several years have clearly paid off, driving improved top and bottom-line growth,” she wrote.
Although headwinds for the group are a concern, Tong argued that the company has the ability to shield itself from the worst of inflation while still focusing on innovation that will help maintain its recent momentum. “With a +6% organic sales compound annual growth rate in the last three years, P&G has left the days of eking out flat to 2% growth in the past,” she wrote. “We believe +4% sales on the higher base is sustainable going forward, translating to approximately $3 billion in incremental sales annually.”
Of course, some of that growth was due to the pandemic. Yet she noted that P&G deserves credit for already being on the path to superior growth long before the lockdowns, notching a 6% organic sales run rate in the 12 months ended December 2019, before Covid-19 upended life in the U.S. and many other places.
Moreover, Tong believes that P&G has pricing power, along with less risk to lower-end consumers, leaving it better positioned to combat inflation than peers. Therefore the shares—at 26 times her 2022 estimates—deserve a greater premium to the group, she wrote..
P&G is up 0.3% to $159.30 at recent check. The shares have fallen about 3% year to date, but are up 16.5% in the past 12 months. The company delivered strong earnings to start the year in January, and Barron’s noted how it’s a good bet for inflationary times. It gained another bull in March too.
That said, not all analysts are as optimistic, as P&G got a downgrade from
Why P&G Just Gained a New Fan
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P&G’s products were popular earlier in the Covid-19 pandemic.
Joe Raedle/Getty Images
Investors have been wary of consumer staples stocks lately, given worries about high inflation and difficult comparisons to pandemic-boosted sales in recent years. Yet Raymond James argues that
P&G
can still outperform.
Analyst Olivia Tong initiated coverage of Procter & Gamble (ticker: PG) with an Outperform rating and $175 price target. “Strategy and portfolio changes in the last several years have clearly paid off, driving improved top and bottom-line growth,” she wrote.
Although headwinds for the group are a concern, Tong argued that the company has the ability to shield itself from the worst of inflation while still focusing on innovation that will help maintain its recent momentum. “With a +6% organic sales compound annual growth rate in the last three years, P&G has left the days of eking out flat to 2% growth in the past,” she wrote. “We believe +4% sales on the higher base is sustainable going forward, translating to approximately $3 billion in incremental sales annually.”
Of course, some of that growth was due to the pandemic. Yet she noted that P&G deserves credit for already being on the path to superior growth long before the lockdowns, notching a 6% organic sales run rate in the 12 months ended December 2019, before Covid-19 upended life in the U.S. and many other places.
Moreover, Tong believes that P&G has pricing power, along with less risk to lower-end consumers, leaving it better positioned to combat inflation than peers. Therefore the shares—at 26 times her 2022 estimates—deserve a greater premium to the group, she wrote..
P&G is up 0.3% to $159.30 at recent check. The shares have fallen about 3% year to date, but are up 16.5% in the past 12 months. The company delivered strong earnings to start the year in January, and Barron’s noted how it’s a good bet for inflationary times. It gained another bull in March too.
That said, not all analysts are as optimistic, as P&G got a downgrade from
JPMorgan
last week, based on worries that its outperformance could fade. Just over half of the 24 analysts tracked by
FactSet
rate the stock at Buy or the equivalent.
Write to Teresa Rivas at [email protected]
Source: https://www.barrons.com/articles/procter-and-gamble-stock-inflation-covid-51649425289?siteid=yhoof2&yptr=yahoo