Procter & Gamble
Procter & Gamble is rightly the market leader in consumer goods. P&G originated in 1837 and was initially a fast-growing, not very big business. And after about 20 years, sales exceeded a million dollars.
The company has been on the market for more than one hundred and eighty years and over the years has become a huge conglomerate that has introduced many innovations in all the sectors in which it has a presence.
The company's products are available in 180 countries and are distributed through grocery shops, closed warehouses, pharmacies, department stores, speciality beauty salons, and pharmaceutical markets.
Procter & Gamble is said to have created a brand management system. Thus, the company owns more than 20 brands with sales in excess of $500 million. Incidentally, P&G's capitalization exceeds $350 billion.
Procter & Gamble is a dividend aristocrat that has regularly paid dividends for the last 130 years. At the same time, dividend payments have grown steadily over the past 60 years.
Colgate-Palmolive, Unilever, Schwarzkopf - these companies are direct competitors of Procter & Gamble, but P&G is ahead of them because it has an unconventional marketing approach and a competent advertising campaign.
It should be noted that P&G was one of the first to see the potential of advertising. It started with print advertising and sending out product sample leaflets to customers, then the company switched to radio advertising and with the advent of television advertising became mass-marketed.
One of the trump cards of advertising was giving out Pampers nappies to parents of newborns in maternity homes, Procter & Gamble also sent Gillette razors to guys.
The company operates in the following areas: beauty products, body care, health, cleaning and washing products and hygiene products for children and women.
The company has four divisions
- GBU works with customers all over the world. This department is responsible for innovation and financial results.
- The GBU is responsible for the marketing component of Procter & Gamble's business, studying the characteristics of consumers and suppliers. The department is also responsible for implementing initiatives.
- GBS provides business support.
- The CF department is responsible for implementing functional innovations.
The business has benefited from the pandemic and has prospered throughout 2020. When the vaccine became available and large economies opened up, the company continued to grow. So, reports show that the performance in the second quarter of 2021 continues to delight investors. The issuer's revenue increased by 8% compared to the previous year. The revenue figure was also positively influenced by the introduction of new products, which were in demand during the coronavirus pandemic.
Net sales amounted to $19.75 billion, experts had expected it to be around $19.27 billion. Net income rose from $3.72 billion to $3.85 billion and adjusted earnings were about $1.64 per paper.
Procter & Gamble improved its outlook for 2021. The issuer expects sales growth of 5-6% compared with the previous forecast of 3-4%. Adjusted earnings at the current year-end growth rate will be around 8-10% with a forecast of between 5% and 8%.
Digital trading and P&G
CEO David Taylor is preparing to expand into the digital space, as this is where the real danger lies. Recently, some young businesses that have succeeded in selling their products online have surpassed Procter & Gamble in many ways. We're talking about Dollar Shave Club and Harry's, which have led to a shrinking market share of P&G Gillette razors in the United States.
In December 2020, P&G broke an agreement with Billie, an online seller of women's shaving products. The acquisition of Billie will be a strong boost for the issuer against competitors.
At the same time, it cannot be said that the corporation is helpless in the e-services market. At the end of last year, it generated around 11% of its revenue from e-commerce. That's about 6% of P&G's revenue a couple of years ago. Yes, it is hard to call P&G an e-commerce hub, but the company is definitely moving in the right direction.
Back in 2019, the company's management first started using the term "smart audience". Procter & Gamble has started collecting information about its customers to connect with each of them using direct contact strategies.
Do I buy stock?
In recent years, P&G has changed its business to meet the needs of a new generation of customers. To conquer new markets, the company is launching a new studio, P&G Ventures. We can see that Procter & Gamble is willing to evolve with its customers, which ensures the company's long-term stability.
Although the issuer's stock is worth adding to its investment portfolio, it is not worth buying just yet. This stock clearly loses out to others, which have shown a growth rate of between 20% and 25% in recent quarters. P&G is currently below that level, although its position is improving.
In addition, the stock has an RS rating of 70, which is still below the low of 80.
However, as the pandemic is not going to end anytime soon and the critical products P&G deals with will still be in demand, this company will continue to improve its quarterly reports. It is now better to add the stock to the 'waiting list' and wait for favourable market conditions.
By the way, that could happen soon. P&G shares underwent a mid-term correction not too long ago. From the level of $145 (November 2020 high), the price fell to support $122, where buyers were able to intercept the initiative and are now storming the resistance zone of $140.
Buyers have now lost enthusiasm and if they don't like the next report, the market could start to correct. In that case, the instrument could fall to a range of $125 to $130. And it is this correction that we suggest using to enter the market with a medium-term target of $147.