"Global Leading Consumer Goods Stock P&G, Shareholder Returns Expected to Increase"

Korea Investment & Securities Report

[Asia Economy Reporter Myunghwan Lee] Procter & Gamble (P&G), a leading American retail company, reported third-quarter results that exceeded expectations, prompting securities firms to forecast an increase in the company's shareholder return appeal.

On the 20th, Korea Investment & Securities analyzed, "P&G is a company that has increased its dividends for 66 consecutive years and has maintained strong shareholder return appeal even during the U.S. financial crisis, the spread of COVID-19, and periods of interest rate hikes."

P&G's net sales from July to September rose 1.3% year-on-year to $20.61 billion (approximately KRW 27.68 trillion). Adjusted earnings per share (EPS) were $1.57, down 2.5% from the same period last year. Both net sales and EPS surpassed market expectations of $20.34 billion and $1.55, respectively.

Korea Investment & Securities attributed the strong performance to a 9.0% price increase compared to the previous year, while total sales volume only declined by 3.0%. However, excluding currency effects and one-time factors, sales increased by 7.0%. Since P&G generates over 50% of its sales overseas, the firm noted that the rise in the dollar's value led to a downward revision of sales guidance.

Korea Investment & Securities diagnosed that P&G's shareholder return appeal will be highlighted once again. The company's annual net sales guidance for fiscal year 2023 is projected to decline by 1-3% compared to the previous year, a downward revision from the 0-2% growth forecast announced in the previous quarter. However, excluding currency and one-time factors, sales are expected to grow by 3-5%. Accordingly, the annual dividend payout is projected at $9 billion, and share repurchases are expected to range between $6 billion and $8 billion. Excluding one-time factors, additional sales growth is anticipated in 2023, and with stabilization of government bond yields, dividend appeal is expected to be reemphasized, according to Korea Investment & Securities.

There is also an assessment that the resolution of this year's negative factors could lead to a stock price increase. Korea Investment & Securities explained that the strong dollar limited sales growth, and steep inflation led to increased costs. For 2023, they expect sales growth and profitability improvement due to a slowdown in U.S. monetary tightening and easing inflationary pressures. They also forecast that as China relaxes its zero-COVID policy, sales of Asian beauty products based on premium products will increase.

Researcher Bowon Choi of Korea Investment & Securities advised, "In 2023, the company is presented as highly attractive for investment due to expected performance improvements following the easing of macroeconomic uncertainties."