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Wow! Procter & Gamble (PG) is in the midst of a sell-off as I write this. The stock is down better than $2 to $59.80. In percentage terms, shareholders are looking at a drop of well over 3%. Volume is strong.What's driving all the selling? Of course, it has to be an earnings report. For the fiscal fourth quarter, P&G saw a 9% decline in per-share profit to 71 cents. Not only was there a decline, but expectations were missed. Yes, the insult to the injury lies in the fact that analysts were hoping for 73 cents per share.
Come on, management, you can do better than that! Actually, the team didn't put in such a bad performance.
Check out the corporate press release. The cash-flow achievement should please investors. Cash from operations for the last twelve months increased from $14.9 billion to $16.1 billion. Adjusted free cash flow was $14 billion, more than enough to cover the dividend obligation. And the productivity of free cash flow, as defined by the company, was 125%...meaning that the number represented 125% of net earnings after exclusion of a divestiture gain.
The bearishness today is meaningless to long-term shareholders. And traders possibly could even look at the dip, I suppose. Fundamentally, P&G will be fine. I'm not concerned about the retreat in quarterly profit. The business generates a nice amount of cash from its famous products, and the current dividend yield is over 3%. Call me a bull on this one.
Disclosure: I don't own any company mentioned; positions can change without notice.
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