May 12, 2013
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RELATED TICKERS: PG
Is Procter & Gamble Due for a 50% Run-Up?
Is P&G due for a 50% run up? Of course it is possible but I highly doubt it. Ackman cites 5% growth and multiple expansion.
2009 earnings were $4.29
2010 earnings were $4.11
2011 earnings were $3.95
2012 earnings were $3.85
Do you see a pattern here? Earnings are expected to grow for fiscal year 2013 but earnings have been going down not up. Analyst expecations are that they will stay flat and analysts rarely predict falling earnings, I'll bet they didn't predict falling earnings in 2009.
P&G has underperformed the bull market but it is a consumer staple that has had declining earnings and questionable management.
What if they are earning $4 per share 2 years from now which is also possible and the market slaps a 15 PE, or what if we are in recession and the market slaps a 13 multiple isntead of 20?
Ackman thinks he can jawbone PG to $6 earnings and a 20 multiple. But the market doesn't work like that, even for him.