Johnson & Johnson (NYSE:JNJ) and The Procter & Gamble Company (NYSE:PG), have many similarities. They produce consumer goods that cost more and hope consumers will pay for the brand names. Warren Buffett likes both companies as well due to their pricing power. However it seems that a divergence might be beginning.
The world’s largest consumer goods company, Proctor & Gamble, seems to have taken a stumble in its latest earning reports to its shareholders. In its third quarter earnings report, the giant company seems to have taken a beating because it has reported a lower profit that has been attributed to a stronger dollar, and an increase in the cost of commodities.
The giant consumer company has in fact seen its profits dip in the last two quarters. In the first quarter, profits declined by around 1.9% and in the second quarter, profits fell by nearly half, and this according to the company was due to increased write downs for new acquisitions, as well as higher commodity costs.
However, even with dwindling profit margins, P&G did not disappoint Wall Street since their relatively low performance was predicted, and expected. But analysts were not so pleases as they bombarded the CEO Robert McDonald, with questions and demands that he offers an explanation as to why the firm’s performance has taken such a nose dive. The CEO attributed the poor showing to a weakening sales volume, especially in developed markets, and a need for lowered prices in a number of product segments such as oral care, blades, and even powdered laundry.
On the other hand, Johnson & Johnson (NYSE:JNJ) reported its earnings as it prepared to change its leadership. The medical giant had a better showing than P&G and it announced sales of $16.1 billion that reflected an operation growth of around 6.4%. In this first quarter, JNJ had net earnings per share of $1.41, and net earning of $3.9 billion. Additionally, the company had an after tax gain of $106 million that was attributed to adjustment in currency that occurred due to the acquisition of Synthes Inc.
The Chief Executive Office based this performance on the fact that it was bringing innovations that were meaningful to its customers, via launching products. The CEO William Weldon also added that the dedication of staff at JNJ contributed immensely to the showing of the giant company. This performance by JNJ was buoyed by the approval of major drugs in its stable like Xarelto, a drug that is used to prevent stroke.
Therefore, performance among these two major companies is glaringly different. On one hand, Proctor & Gamble Company (NYSE: PG) seems to be having a string of bad showing, to a point where its shareholders have started complaining; while, Johnson & Johnson seems to offer a great performance for its shareholders. In both cases, the two giant firms seem to have had profits, but only JNJ seems to have had a better showing, by having increased its profits showing. In fact, P&G’s performance over the last two quarters has even led to a review of its projected earnings in a bid to ensure that the profit shortfall is not as glaring.
J&J is currently in the lead.