Ahead of the Bell: Procter & Gamble downgraded
NEW YORK (AP) — Mixed earnings results in the latest quarter and a "disappointing" outlook for the near future led one analyst to downgrade the stock of consumer products giant Procter & Gamble Co. on Monday.
Oppenheimer analyst Joseph Altobello cut his rating on the Cincinnati-based company's shares to "Perform" or "Neutral" from "Outperform," saying the company "appears to have been disproportionately impacted by sluggish market growth."
"While we expect some incremental improvement in trends, the company is likely to remain growth-challenged and no longer warrants the benefit of the doubt," he said in a note to clients.
On Friday, the maker of products ranging from Bounty paper towels to Luvs diapers said it's rolling back some price increases and focusing on introducing new products in developed markets as it tries to reignite market share growth. The world's largest consumer product maker also lowered its guidance below expectations for the fiscal year, as it its fiscal third-quarter net income dropped 16 percent, hurt by restructuring charges and continued high costs for items like diesel fuel and packaging. Shares fell nearly 4 percent Friday and were down slightly in trading Monday before the opening bell.
"Previously, (we) have hung our hats on the belief that the company would deliver rapid improvement in results in the back half of fiscal 2012, largely on easier commodity cost comparisons and new product innovation. Clearly this is no longer the case," Altobello wrote.
Consumer product companies across the board have been raising prices to deal with higher costs for materials like pulp, fuel and packaging. P&G's rival Kimberly-Clark said last week that higher prices helped boost its quarterly earnings 34 percent. But results for P&G, which has an arsenal of products that include Tide detergent and Olay skin cream, illustrate that even big companies that sell trusted brands can lose customers to lower-priced rivals when they raise prices.
