P&G's Efforts to Win Back Customers From Rivals Will Be Under Microscope--Earnings Preview

By Sharon Terlep

Procter & Gamble Co. is scheduled to report earnings for the quarter ended Sept. 30 before the market opens Friday. Here's what you need to know.

EARNINGS FORECAST: Analysts expect P&G to report "core" earnings of $1.07 cents a share, according to Thomson Reuters. That compares with core earnings of $1.03 cents a share a year earlier.

SALES FORECAST: Net sales are expected to rise to $16.69 billion from $16.52 billion a year earlier.

WHAT TO WATCH:

CONSUMER SPENDING: The malaise hanging over the biggest makers of consumer staples appears to be sticking around. Nielsen has reported continued weakness in major categories from diapers to laundry detergent. Unilever PLC reported Thursday that organic sales growth, which strips out currency movements and portfolio changes, slipped to 2.6% in its latest quarter. RBC says the analyst consensus for P&G's organic sales growth is 1.1% in the quarter, though RBC is expecting 1.4%.

PELTZ REACTION: P&G says it prevailed in its fight to keep investor Nelson Peltz off its board, but the activist remains one of P&G's largest shareholders. Expect Mr. Peltz and his team to thoroughly scour P&G's results and critique anything they deem problematic. Last quarter, after P&G said it cut more than $100 million in ad spending on "largely ineffective" digital ads, Mr. Peltz criticized the company for what it called a shortsighted tactic to improve results.

DIGITAL MARKETING: Regarding that reduction, P&G has said it expected to return to more normal spending levels this quarter. In cutting back, P&G said it targeted ads that could wind up on sites with fake traffic from software known as "bots," or those with objectionable content. Marketing executives have become increasingly concerned about the efficacy of digital advertising amid concerns they are wasting money on ads that never reach their intended audience. Investors -- and Madison Avenue -- will be listening to what P&G has to say about how it is dealing with those concerns.

MARKET SHARE: P&G's decadelong trend of market-share losses were at the center of Trian's campaign to get on the board. P&G has slowed share losses in some areas but continues to struggle in key segments such as razors. Investors will be looking for progress in winning back customers from rivals, especially since P&G's argument against Mr. Peltz largely centered on an assertion that it has turned the corner on share losses and stagnating profits.

Write to Sharon Terlep at sharon.terlep@wsj.com

(END) Dow Jones Newswires

October 19, 2017 11:03 ET (15:03 GMT)

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