Why Procter & Gamble Could Move the Dow Tomorrow

Before you go, we thought you'd like these...
Before you go close icon

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

The Dow Jones Industrial Average has held onto this morning's solid gains, rising 85 points as of 11:25 a.m. EDT as many investors pointed to gains in Chinese manufacturing activity as a sign of broader strength in the global economy. Yet Procter & Gamble shows signs of investor anxiety, falling slightly as investors wait for its quarterly earnings report tomorrow morning. Consumer-products rivals Kimberly-Clark and Colgate-Palmolive have already reported their third-quarter results, and P&G will have to work hard to keep up with its smaller rivals in the space.

Procter & Gamble will release its results before the market opens tomorrow. It released its previous quarterly release at 7 a.m. EDT. P&G will also hold an early conference call, scheduled to start at 8:30 a.m. EDT.

Investors expect Procter & Gamble's earnings to fall slightly from year-ago levels, with relatively flat revenue reflecting continued softness in the consumer goods market. Adverse currency impacts have taken their toll on P&G's peers, with Kimberly-Clark reporting a $25 million impact to operating profit from a strong dollar and Colgate-Palmolive reporting a 4.5% negative revenue impact from foreign exchange. Yet unit volume growth and some positive pricing impacts pushed Colgate's overall revenue up 1.5%, and Kimberly-Clark boosted its organic sales by 5% despite seeing overall flat year-over-year revenue.

P&G's growth is most likely to come internationally, especially from emerging markets. Kimberly-Clark saw sales volumes rise 7% in its K-C International segment versus just 2% domestically. Similarly, Colgate-Palmolive grew Latin America unit volume by 5.5% and Asia unit volume by 11%, although currency impacts played a huge role in reducing overall revenue there. With both Colgate and Kimberly-Clark pushing hard to find growth in emerging markets, Procter & Gamble needs to post strong results there to keep pace.

Watch the valuation
One last thing for investors to keep in mind is that Procter & Gamble's current earnings multiple is relatively high. That's not a typical situation for P&G, but it suggests the company needs to produce impressive results to keep investors happy. Otherwise, a drop in Procter & Gamble's stock could send the entire Dow reeling tomorrow.

One thing that has helped Procter & Gamble hold up during tough years is its dividend. But it's far from the only Dow stock that treats investors right with solid payouts. To get some more long-term investing ideas, look at The Motley Fool's special report, "The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so simply click here now and get your copy today.

The article Why Procter & Gamble Could Move the Dow Tomorrow originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Kimberly-Clark and Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

People are Reading