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P&G beats lowered target
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May 1, 2001: 2:08 p.m. ET
Consumer products maker increases profit despite revenue drop; assures on 4Q
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NEW YORK (CNNfn) - Procter & Gamble Co. on Tuesday reported a higher profit for the latest quarter that edged past lowered Wall Street forecasts, even as sales fell.
The maker of Tide laundry detergent, Ivory soap, Pampers Diapers and other products earned $1.01 billion, or 71 cents a diluted share, excluding special charges, for its third quarter ended March 31. Analysts surveyed by earnings tracker First Call lowered their forecasts to 69 cents a share after a Feb. 26 warning from the company. Forecasts had been for the company to earn 72 cents a share before the warning.
The company earned $923 million, or 64 cents a diluted share, excluding special charges in the year-earlier period.
The news was well received by investors, as shares of P&G (PG: up $4.33 to $64.38, Research, Estimates) rose more than 7 percent to lead a rally in the Dow Jones industrial average.
"I think the market is taking some comfort that Procter is certainly making some progress," Patrick Schumann, food analyst with Edwards Jones, told CNNfn's The Money Gang. "There's reason to be cautiously optimistic that the worst is probably behind us."
Taking into account charges for a previously announced restructuring, which includes cutting 9,600 jobs worldwide, P&G posted net income of $893 million, or 63 cents a diluted share, in the latest period, up from $753 million, or 52 cents a share, earned a year earlier.
P&G said profit from its health care products fell 10 percent in the period, but profit from fabric and home care products increased 23 percent. Income in the paper products segment grew 8 percent, and soared 34 percent in its food and beverage division.
Revenue decreased to $9.51 billion from $9.78 billion a year earlier. The company said that without the impact of change in exchange rates revenue would have been roughly unchanged. The company pointed to the currency problems in Turkey when it issued its February warning. The company said improved pricing and a favorable mix of products helped offset a decline in unit sales in the period.
Schumann said Edward Jones, which has a "buy" rating on the stock, is looking for better top-line growth going forward.
"We're looking for better volume trends for the future and that's going to give a better quality of picture to the earnings going forward," he said. "With so much cost savings and restructuring happening, Procter's going to be able to hit the bottom line numbers easier, but we would like to see better top-line growth."
P&G said it is comfortable with earnings forecasts for the fourth quarter, when the First Call consensus sees the company's earnings rising to 60 cents a share from 55 cents a share a year ago. But the company continues to see a difficult sales environment, with unit volume expected to be flat to up 2 percent in the period, and net sales excluding the exchange rate expected to grow in the low single digit percentage range.
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P&G is the last Dow component to report results for a quarter ending in March. Three of the 30 stocks have quarters that ended in April and have yet to report those results.
P&G announced last week that it is looking at the possible sale or other strategic moves for two of its brands -- Jif peanut butter and Crisco shortening. The company said the products were still profitable but no longer a strategic fit.
"They're focusing on their stronger, larger brands, and I think that's a prudent strategy for the long term," Schumann said. "I think they'll lean towards the higher growth product lines but will take a long time." 
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