3 Big Highlights From Procter & Gamble's Q3 Report

Another quarter is in the books for Procter & Gamble (NYSE: PG), and it was a good one. The company earned $1.37 per share on sales of $20.1 billion during its recently completed fiscal third quarter, topping estimates of $1.35 and $19.3 billion, respectively. Both numbers were also up on a year-over-year basis.

This is a story, however, that gets better the deeper you dig into it. Here's a closer look at the top three bullish aspects of P&G's recent Q3 results.

1. Pricing power is proven

Last quarter's top-line growth of 4% is healthy enough given Procter's size; it's tough to grow a great deal when you're already huge. That 4% pace, however, is also a little bit misleading by understating how much growth the company effectively achieved. On an organic basis (which factors in the impact of discontinued products or acquisitions), Procter & Gamble's third-quarter year-over-year sales growth is actually 7%.

And even that number understates just how well the company did last quarter. Adverse exchange rates shaved 4% off reported sales, while a sheer 3% decrease in the amount of goods sold worked against the company as well. It was the 10% year-over-year increase in prices that produced all of P&G's third-quarter revenue growth, and then some. While consumers may be grumbling about higher prices, they're still paying them.

It's a testament to the pricing power P&G enjoys with its workhorse brands like Pampers, Tide, and Charmin.

2. Costs are being contained

Like every other corporation and consumer, Procter & Gamble is paying more for goods and services. But it's not paying as much as it's been able to raise its prices. Last quarter's 4% uptick in sales was paired with a much more modest 1% increase in its cost of goods sold. Outcome? Gross profits grew to the tune of 6%, from $4 billion in the third quarter of the prior fiscal year to more than $4.2 billion this time around. Pre-tax income grew 5%.

Granted, a higher tax rate ate into that earnings growth. That's out of P&G's control, though. The aspects of the business it can manage -- like costs -- are being pretty well contained.

3. Look for more of the same (if not better)

Last but not least, don't be surprised to see this consumer goods company continue growing its top and bottom lines somewhere near this pace.

While Procter got a bit of a slow start to the year, based on its third-quarter results and what it's seen so far for the first month of its fourth quarter (now underway), it's now looking for full-year, overall sales growth of 1%. That's up from the previous full-year revenue guidance of between nil and a 1% drop.

That's not a sweeping change. But bear in mind half of the numbers for the year were already in place when the company offered that prior guidance. It's overcoming a lot of adverse stuff in the meantime. And, while Procter & Gamble itself hasn't yet publicized any expectations for the next fiscal year beginning in July, analysts are collectively calling for sales growth of 4.5%. Earnings are expected to improve by an even more impressive 9%.

It's not too late to buy Procter & Gamble stock

The company's rekindled strength is well-reflected in the stock's recent performance. Indeed, with Friday's post-earnings pop of nearly 4%, shares are up 15% just since March's low and trading near a 52-week high -- an intimidating run to would-be buyers. P&G shares aren't exactly cheap, either, priced at 24 times next year's expected earnings.

This is a case where investors are better off paying a premium for quality and not sweating a stock's recent price action. Procter shares may well peel back before they move meaningfully higher again. But the real risk here is in waiting for a sizable dip that may never happen.

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James Brumley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.