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Consumer goods conglomerate Procter & Gamble (PG - Free P&G Stock Report) issued solid fiscal third-quarter (fiscal year ends June 30th) earnings. However, share net was slightly below our forecast, and the stock was down modestly on the report. Core earnings were up 6% during the March quarter (though four pennies shy of our estimate). Too, sales grew 1% year to year, to $16.5 billion (slightly below our $16.6 forecast).

Healthy volume growth and good pricing initiatives helped spur organic revenues over the period, helping to offset the drag from foreign currency and higher commodity costs. Indeed, the consumer goods maker's Beauty, Health Care, and Fabric & Home Care categories' organic sales increased at a mid- to upper-single digit clip; Baby, Feminine & Family Care increased at a low-single digit clip; but Grooming slipped 1% over the interim. Too, the bottom line got some lift from productivity improvements and tax benefits.

P&G's strategic growth efforts should continue to spur near-term gains. Although the company hit a rough patch in 2016, due to a difficult foreign exchange environment (which eroded much of its gains from overseas markets), management has been hard at work strengthening its business.

Over the past few years, the company has divested several of its underperforming business lines. And Procter & Gamble may eye smaller tuck-in acquisitions to complement its current roster in the coming quarters. To this end, the company recently purchased Merck's (MRK - Free Merck Stock Report) European OTC business, which helped bolster its personal healthcare division.

Moreover, P&G will probably focus on productivity improvements to drive margins. Plus, increased efficiencies ought to help lower operating costs. Innovation ought to remain another priority, as the company invests in its product pipeline.

P&G has also been ramping up its marketing expenditures and boosting its branding efforts. These moves should help it gain market share. What's more, we believe that the strong brand equity will make consumers more likely to stick with Procter & Gamble's products even with the company's recent price hikes. Moreover, management will likely rely on technological enhancements to grow its e-commerce direct-to-consumer business.

All told, we believe that the company is in good shape and are maintaining our full-year estimates. We continue to look for core earnings to advance 5%-7%, to $4.50 a share, for fiscal 2019, and for sales to increase about 1%, to $67.5 billion.

Although the stock pulled back on the earnings report, it is important to note that PG shares have climbed sharply since the start of 2019, so the good news may already be baked into the recent quotation. Looking further down the road, the blue chip holds limited capital appreciation potential, but may tempt those seeking an income vehicle and risk-adjusted total return possibilities.

About The Company:The Procter & Gamble Company makes detergents, soaps, toiletries, foods, paper, & industrial products. Brands include: Head & Shoulders, Olay, Pantene, SK-II, Wella, Fusion, Gillette, Mach 3, Presobarba, Crest, Oral-B, Vicks, Ariel, Dawn, Downy, Febreze, Gain, Tide, Always, Bounty, Charmin, and Pampers. 

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.