01—Abstract
Summary
Summary of the 8-K filed December 11, 2002. Cited figures are marked; the original filing is the authoritative source.
On December 11, 2002, Procter & Gamble furnished an 8-K under Regulation FD announcing that it is raising its estimated earnings per share growth for the December 2002 quarter (the second quarter of fiscal 2002/03).
The increase is driven by higher operating margin growth than previously guided, with operating margin improvement now expected toward the upper end of the prior 100 to 150 basis point range, helped by gross margin expansion and reduced overhead. management expects volume growth in the high single digits, led by its health care business and continued strength in developing markets, with acquisitions and divestitures contributing less than one percent. Sales are expected to grow in the mid to high single digits, with no foreign exchange impact on the top line this quarter. Core EPS, which excludes restructuring charges, is now expected to grow in the high single digit range and above current consensus.
The base period included a one-time gain from the divestiture of Comet; excluding that gain, core earnings would have grown in the mid teens. For the full fiscal year, P&G expects to achieve its long-term growth rates, with core EPS growing at a double-digit pace and reported EPS growing faster than core EPS due to lower restructuring charges versus the prior year. Organic sales (excluding FX) are expected to rise four to six percent, with a slightly positive FX contribution.
Management said it is comfortable with existing consensus estimates for January to June 2003. The company is scheduled to hold its second quarter 2002/03 earnings conference call on January 28, 2003.
02—Key points
Key Highlights
- Raised December 2002 quarter EPS growth guidance, citing higher operating margin growth than previously expected
- Core EPS now expected to grow high single digits, above current consensus; excluding the one-time Comet divestiture gain in the base period, growth would have been mid-teens
- Volume expected to grow high single digits, driven by the health care unit and developing markets; acquisitions/divestitures add less than 1 point
- Quarterly sales expected up mid to high single digits, with no FX impact on the top line
- Operating margin growth expected at the upper end of the prior 100-150 basis point guidance range, supported by gross margin expansion and lower overhead
- Fiscal year outlook reaffirmed to achieve long-term growth rates: core EPS growth in double digits, organic sales growth of 4-6%
- Management comfortable with existing consensus estimates for January to June 2003
03—Questions
Frequently Asked Questions
Why is P&G raising its earnings guidance for the December 2002 quarter?
P&G attributes the higher outlook to operating margin growth exceeding previous guidance, which is being driven by gross margin expansion and reduced overhead expenses.
Did the Comet divestiture affect the reported growth rate?
Yes. The prior-year base period included a one-time gain from selling Comet. Excluding that gain, core earnings would have grown in the mid-teens, so the high single digit guided growth is measured against an inflated base.
What does the guidance imply for full-year fiscal 2002/03?
P&G expects to meet its long-term growth rates, with core EPS growing double digits. Reported EPS growth should exceed core EPS growth because restructuring charges are lower than in the prior year. Organic sales growth is expected at 4-6%, with a slight positive FX contribution.
Is P&G changing its outlook for January to June 2003?
No. The company said it is comfortable with existing consensus estimates for the January to June 2003 period, so no change was indicated for that half.
When will P&G discuss these results in more detail?
P&G plans to webcast its second quarter 2002/03 earnings conference call on Tuesday, January 28, 2003, at 8:30 a.m., with the webcast available through its investor relations website.
04—Continue