P&G Rides The Tide

Image source:

What's going on?

Procter & Gamble (P&G), the maker of popular consumer products like Gillette razors and Pampers diapers, saw its stock jump 3% on Friday after it reported its financial results and said its sales would grow more than expected this year.

What does this mean?

Over the last several years, P&G hasnt been able to grow revenues very quickly (in fact, revenues often declined), and has focused mainly on cutting costs in order to protect its profits. Part of the problem has been sluggish overall economic growth which inevitably impacts such a massive consumer company. But as economic activity picked up in the latter half of 2016 (in most major markets), it appears to have fed through to P&Gs sales.

Why should I care?

For the stock: P&G has slimmed down to speed up.

In 2015, P&G agreed to sell most of its beauty business (e.g. CoverGirl makeup) in a deal that was valued at almost $13 billion. Its also recently made other sales, shedding a total of about 100 brands. The idea has been to lose underperforming brands and focus on the ones where it sees better growth potential. The combination of the new strategy and an improving global economy appears to be helping its sales and stock price pick up.


The bigger picture: A rising US dollar is a threat to multinational companies based in America.

P&G grew its total sales by about 2% versus a year ago, but when the value of its international sales is translated back into US dollars, its overall revenue actually declined (because most other currencies have gone down versus the US dollar). The US dollar could move significantly higher this year, especially if new laws encourage more production to take place in America, which would probably cause companies to shift money into the US (thus pushing up the dollar). The result would create a headwind for some US companies profits and stock prices.

Originally posted as part of the Finimize daily email.

The top 2 financial news stories in 3 minutes. Join over one million Finimizers

Read next

A Wobble For The British Economy?

Sign up to Finimize

Get the two most important global financial news stories each day. Sent at midnight UK time.

Get started with one email a day

The top financial news stories in 3 minutes.