P&G, the world’s largest consumer-goods company, cut its earnings and revenue forecasts last week for the second time in fewer than two months. For the fiscal fourth quarter ending this month, earnings per share excluding some items will be as much as 79 cents, down from a previous forecast for a maximum of 85 cents, Cincinnati-based P&G said. A year earlier, P&G reported adjusted earnings of 84 cents a share.
“There’s been slow to no GDP growth in developed markets and significant levels of unemployment in the United States and in Europe,” Chief Executive Officer Robert McDonald said at a June 20 investor conference in Paris. The company, whose brands include Tide detergent and Gillette razors, also attributed the reduced forecast to currency losses as overseas earnings carry less value when converted into dollars.
Through June 22, the dollar has gained 6.5 percent against seven major currencies since April 30, according to the Federal Reserve’s U.S. Trade-Weighted Major Currency Dollar Index. Also, for the first time in 13 years, the real, ruble and rupee are weakening the most among developing-nation currencies, while the the yuan has depreciated more than in any other period since its 1994 devaluation.
New York-based Philip Morris cut its full-year earnings forecast to $5.10 to $5.20 a share, from an April prediction of $5.20 to $5.30, citing the dollar’s strength. The maker of Marlboro cigarettes generates all of its sales outside of the U.S.
Philip Morris “is just a canary in the coal mine for many others who are going to use currencies as an excuse or legitimate reason” for declining profit, said Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, which manages about $54 billion.
Adding to executives’ concerns, U.S. hiring shows no signs of a rebound this year, Federal Reserve officials said last week in reducing their projections for 2012 growth. The Fed pared its estimate for U.S. 2012 gross domestic product growth to 1.9 percent to 2.4 percent, down from a 2.4 percent to 2.9 percent prediction in April.
FedEx’s projections for GDP growth of 2.2 percent in the U.S. and 2.4 percent globally this calendar year assume “the successful management of the debt crisis in Europe and the avoidance of significant tax increases next year in the U.S.,” Michael Glenn, CEO of the FedEx Corporate Services unit, said on a June 19 conference call.