Consumer discretionary

Procter & Gamble Co (PG) Downgraded to Hold at Stifel on Three Main Reasons

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Stifel’s Mark Astrachan expects Procter & Gamble to trade in the range of $84 to $86 over the next 12 months

Procter & Gamble (NYSE:PG) is on track to achieve a sales growth rebound in 2016 after nearly three years, due to its simplification strategy, cost cutting, and spending on marketing. While the stock has grown over 11% so far this year, it is expected to remain in the price range, at least for Stifel, which downgraded the stock on the back of three main reasons. 

Mark Astrachan, analyst at the firm, lowered P&G’s stock rating from Buy to Hold, and cut its price target from $88 to $86, which still represents a potential upside of over 2%. The shares edged out 0.32% and closed the market at $84.28 on Wednesday. 

The analyst sees limited upside to the stock price on the back of three main issues: currency headwinds, moderate estimated input cost inflation, and the on-going geo-political uncertainty. Therefore, he expects the stock to trade in the price range of $84 to $86 over the next 12 months. 

Nevertheless, the investment firm continues expecting 2% growth in organic sales during the fiscal year 2017, with most increase in two-year compounded annual growth rate (CAGR) throughout the period, boosted by improving market share on innovation and reinvestment.  

Mr. Astrachan noted in the report, “Overall, while the company continues to anticipate exiting F2017 with organic sales growth near market growth, currently approximately 3.0 percent, we believe it is more likely to begin in F2018 as P&G benefits from anticipated investment and innovation.” He estimates earnings per share (EPS) of $3.80 for FY17 and $4.01 for FY18, compared to consensus estimates of $3.86 and $4.17, respectively.

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