Procter & Gamble Appoints Peltz To Board After Proxy Battle

After a prolonged proxy battle, activist investor and co-founder of Trian Fund Management, Nelson Peltz has been appointed to Procter & Gamble’s or P&G’s (NYSE:PG) board, effective Mar 1, 2018.

Shares of the world’s largest consumer products maker by market value gained 1% in after-hours trading on Dec 15.

The latest announcement came after P&G revealed last month that Peltz is leading Ernesto Zedillo by 0.0016%, or 42,780 shares, out of the company's nearly 2.7 billion in diluted shares outstanding. However, in its latest sec filing, the company said that the results between Ernesto Zedillo and Nelson Peltz were extremely close, with Peltz receiving almost 50% of the shares voted.

P&G announced that Zedillo and 10 others were re-elected. The company agreed to add Peltz to its board of directors as he had garnered so much shareholder support. “Because the election results were so close, and because a large number of shareholders voted for Nelson Peltz to be a Director, the Board has engaged in numerous discussions with Mr. Peltz regarding a Board seat.” P&G said.

P&G also revealed that the company had "numerous discussions" with Peltz on how to boost the company and not focus on cutting jobs or consolidating business units. P&G officials said Peltz has reaffirmed that he doesn't want the company to grow its debt, reduce research and development spending, break up the company or see it exit Cincinnati.

Meanwhile, the consumer goods conglomerate increased its board size by two to 13 in order to accommodate Peltz and appoint a new director — Joseph Jimenez, CEO of Swiss pharmaceutical giant Novartis.

It is to be noted that the company, currently under CEO David Taylor, is simplifying its operating structure to boost sales and profits. In contrast, during Peltz’s campaign, he had slammed P&G's "stifling bureaucracy" and advocated consolidating the company's business units radically from five to three standalone business units, namely grooming, home care and family care.

Investors should note that P&G has been struggling to boost sales for the last few quarters. A soft consumer spending environment in the United States and slowing global market growth are pressing concerns for the company.

Resultantly, P&G's shares have gained only 9.3% so far this year, underperforming the industry’s growth of 18%. Also, the trend in current-quarter and current-year earnings estimates is not satisfactory as it has remained stable over the past 30 days.

Now, it is to be seen whether Peltz's inclusion would drive the company to focus more on acquiring small brands or bring in innovations. “I believe in the tremendous potential of P&G,” Peltz said in a statement on Dec 15. He added, “I look forward to bringing fresh perspectives to the boardroom, and working collaboratively with David and the rest of the board to drive sustainable long-term shareholder value.”

Zacks Rank & Key Picks

P&G currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks from the Zacks Consumer Staples sector are Pilgrim's Pride Corporation (NASDAQ:PPC) and Michael Kors Holdings Limited (NYSE:KORS) KORS, sporting a Zacks Rank #1 (Strong Buy) and Guess', Inc. (NYSE:GES) with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here..

Pilgrim's Pride is expected to register 62.7% EPS growth this year.

The earnings estimates of Michael Kors have moved north 6.7% over the last 60 days for the current year.

Guess' has an expected earnings growth of 39.8% for the current year.

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