Morningstar

What Organizational Changes Mean for P&G

The firm's efforts to reignite its sales and profit trajectory are gaining traction.

Securities In This Article
Procter & Gamble Co
(PG)

We walked away from

This shift aligns with CEO David Taylor’s goal over the past three years to enhance accountability across the organization and better align the firm’s resources and decision-making closer to the consumer, which we view as wise. While we think this structure will help P&G to be more responsive and agile, we don’t expect it to jeopardize the company's ability to harness the benefits of its scale and negotiating leverage.

Even though P&G is not immune to intense competitive and inflationary pressures, we think its productivity initiatives, vast scale, leading brand portfolio, and entrenched relationships with retailers support its solid competitive edge and ultimately stand to bolster its performance. As such, we don’t foresee any change to our $97 fair value estimate or our long-term outlook for 3%-4% annual sales growth and around 300 basis points of operating margin expansion to more than 24% at the end of our 10-year explicit forecast. Despite the recent uptick in price, we still view the stock as a bit undervalued, trading about 5% below our fair value estimate, and we would suggest investors keep this wide-moat name on their radar.

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About the Author

Erin Lash, CFA

Sector Director
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Erin Lash, CFA, is a sector director, AM Consumer, for Morningstar*. In addition to leading the sector team, she covers packaged food and household and personal care companies. Beyond managing a team of nine analysts and associates covering an array of consumer firms, Lash also conducts fundamental analysis of 13 multi-billion-dollar market capitalization firms in the packaged food and household and personal care space.

Before joining Morningstar in 2006, Lash spent four years as an investment analyst covering retail, transportation, and technology firms for State Farm Insurance. In this capacity, Lash analyzed financial statements, business strategy, and fundamentals of owned companies and potential investments, presenting her recommendations based on this analysis to State Farm portfolio managers for ownership consideration.

Lash holds a bachelor’s degree in finance from Bradley University’s Foster College of Business. She also holds a master’s degree in business administration, with concentrations in accounting and finance, from the University of Chicago Booth School of Business. Lash has completed the Chartered Financial Analyst® designation. She ranked second in the food and tobacco industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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