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Earnings on Tap: Procter & Gamble

Can the firm's cost-savings measures prove positive for its earnings?

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Consumer products giant  Procter & Gamble (PG) will be reporting third-quarter numbers Wednesday before the bell. Wall Street analysts are expecting earnings per share to come in at $0.96 this quarter compared with $0.82 in the year-ago period.

The company's second-quarter earnings increased more than twofold, well above expectations, as the maker of Tide detergent, Gillette razors, and Pamper diapers, grabbed a larger share of the market, especially where demand had been sluggish, such as in the United States.

P&G earned $4.06 billion, or $1.39 per share, in the second quarter as net sales improved 2% to $22.18 billion.

"Global market share trends improved as we continued to implement our growth strategy and made very good progress against our productivity and cost-savings goals," said Bob McDonald, chairman, president, and CEO of P&G.

The company also raised its fiscal 2013 core earnings estimate between $3.97 and $4.07 per share, up from an earlier forecast range of between $3.80 and $4.00.

Procter & Gamble had been under enormous pressure in recent times to reduce costs. While P&G was slow to react, management has responded with a massive $10 billion cost-savings plan to dramatically reduce head count, aiming to return to 8%-10% earnings-per-share growth and free up funds to reinvest in its business. "This overhaul is sizable but necessary, though we're not entirely convinced the firm can pull it off," writes Morningstar analyst Erin Lash.

After gaining nearly 20% on a year-to-date basis, the company's shares are presently trading above Lash's fair value estimate.

Gazala Parveen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.