Procter & Gamble Trumps Earnings With Huge Stock Buyback (PG)

Procter & Gamble (NYSE:PG) did post earnings at $0.67 EPS versus $0.66 estimates from First Call. It also put next quarter targets for $0.88 to $0.90 versus $0.91 estimates and said that fiscal June-2008 earnings per share would grow at a double-digit rate on sales growth and improved margins.  It is going to face near-term margin pressure due to higher commodity prices for an upcoming conversion to a compacted formula for detergents.

But here is the kicker.  The household products giant is going to buy back up to $30 Billion in stock in only a 3-year period.  According to the company, this will be $8 to $10 Billion per year.  This could represent 5% of the outstanding shares if the entire amount is used.  Its whole buyback plan for fiscal 2007 was $5.7 Billion.

P&G has a market cap of $199 billion, and shares are within about 5% of its highs.  Shares are not that volatile though, as its 52-week trading range is only $58.13 to $66.30.  It is kicking out ample cash flows to fund the buyback with $13.4 Billion in cash flow from operations during fiscal 2007.  Its current assets were $24 Billion, total assets including current were $138 Billion, and total liabilities were $71.25 Billion. 

Jon C. Ogg
August 3, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.