Team Medallion, CFA Research Challenge'22, Final Round
Proctor&Gamble
1. Procter & Gamble Co. (NYSE: PG)
Current Price: $71.70
Trade Direction: Long
Target Price: $78
Time Horizon: 2 Years
Presenters: William Woodward, Alex Cooler,
and Adam Spoone
All data is current as of 9/30/15
3. 3/16/20162
International
%
Company Overview
Revenue By Quarter
• The Procter & Gamble Company, together with its subsidiaries,
manufactures and sells branded consumer packaged products
worldwide.
• It operates through five segments: Beauty, Hair and Personal Care;
Grooming; Health Care; Fabric Care and Home Care; and Baby,
Feminine and Family Care.
Q3 - 2015 Q4 - 2015 (Est.) Q1 - 2016 (Est.) Q2 - 2016
Revenue: 18.1B Revenue: 17.8B Revenue: 17.5B Revenue:
17.9B
EPS: 1.00 EPS: 0.92 EPS: 0.9621 EPS: 1.02
Dividends: 0.6436 Dividends: 0.6629 Dividends: 0.6629 Dividends:
0.6629
Comparables Investment HighlightsCompany Overview
5. 4
Comparables
Company Stock
Price
Mkt
Cap
P/E 12M
EPS
ROE Revenu
e
Growth
Y/Y
Net Profit
Margin
Divide
nd
Yield
Proctor &
Gamble Co.
(PG)
$72.28 $196.1
1B
17.96 -
21.5
9%
10.47% -5.26% 49.31% 3.62%
Colgate-
Palmolive
Co. (CL)
$63.07 $56.77
B
22.43 -
1.24
%
204.75% -0.82% 58.21% 2.35%
Avon
Products
Inc. (AVP)
$3.25 $1.41B - - -
8700
.00%
-72.30% -
11.09%
61.1.9% 7.38%
L’Oreal
Group (OR)
$167.4
7
$93.79
B
27.93 -
0.44
%
22.07% -1.84% - - 1.81%
Comparables Investment Highlights Company Overview
6. Despite tough market, P&G continues its dividend yield:
– A company that is extremely devoted to its dividend yield for the past 25 years
– Stock dividend yield is up 33% on its peer group
– Continual rise in dividends attracts investors, will help stock price to rise
Promising outlook in earnings growth
– Earnings forecast shows a strong increase in upcoming years
– Selloff of various product lines will help with future earnings
Major factors to a turnaround: struggling price will come back
5
Investment Highlights
Dividend Yield Forecast Earnings Growth
Investment Highlights Catalysts Comparables
7. 3/16/2016 6
Upside
Several factors to look at:
-Selling relatively close to its 52 week low with an promising future
-P&G is looking to redo its company with remodeling of infrastructure such as hiring new
CEO and 35 year veteran David Taylor on November 1st, 2015
-Selling of struggling lines like Duracell for $4.7B and 43 beauty product lines to Coty for
12.5 billion will help company to focus on more lucrative products like Tide and Gillette
-Stock buyback program
-Plans to re-base EPS with reinvestment behind the business in order to push improved
market share trends
-Settling of the value of the dollar will also help P&G’s overseas products to be cheaper
and increase their competition in foreign/emerging markets
A great dividend yield with a beaten down stock price
Lower P/E to the average of its market sector: Average of about 20
8. Too diversified in the slowing consumer markets
-Owns too many products across too many consumer segments.
-Starting to lose to more single product/segmented companies, i.e. Revlon, Clorox,
L'Oréal
-Specifically losing in Olay, Aussie, Pantene
-International presence
-Largest international presence in Brazil and Venezuela.
-Devaluation of the Brazilian Real and
Venezuelan Bolivar.
-Next to no growth in the international markets
3/16/2016 7
Downside
9. Catalysts
Interest rate hold off
– Dollar is cheaper helping everyday consumer
– Hope for help in consumer market
Dividend Increase
– Have increased dividend payout consistently
(61 years)
– Dividend Growth rate at 10% in the last 25
years
Restructuring
– Announced sale of 43 beauty line products to
Coty
– Expected to close sale of Duracell
– New CEO
8
Dividend
Growth
5 Yr 3 Yr 1 Yr
Growth 7.22% 6.32% 4.93%
Catalysts Management Analysis Conclusion
10. Proven and Experienced Management
Alan George Lafley “AG” (Retiring) CEO and Chairman
Been with the firm since 2015
11/1/2015 will step down and become non executive chairman
David S. Taylor (New) CEO
Been groomed for position
Successful M&A transactions helped him excell
Focused on producing quality products throughout restructuring
of the company, while focusing on the customer
Management Analysis
Management Analysis Conclusion Catalysts
11. Income stock, Dividend Growth
Interest rates in the US held off
hopefully helping consumer
markets
Restructuring of business brands
New CEO
3/16/2016 10
Conclusion
Rationale Risks
Devaluation of Foreign Markets
Too diversified
Consumer Markets down