Procter & Gamble Settling In as Worst-Performing Dow Stock of 2018

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Procter & Gamble Co. (NYSE: PG) posted a share price loss of 1.3% last week, not much, but enough to maintain its rank as the worst-performing Dow Jones industrial average stock of the year to date. So far in 2018, the shares have lost 20.8%.

The second-worst Dow stock so far this year is General Electric Co. (NYSE: GE), which is down 17.6%. That is followed by 3M Co. (NYSE: MMM), down 16.68%, Walmart Inc. (NYSE: WMT), down 11.6%, and DowDuPont Inc. (NYSE: DWDP), down 9.69%.

The Dow dropped 151.75 points over the course of the past week to close at 24,311.19, down 0.6% for the week. Over the past 12 months, the consumer staples sector has dropped 8.3%, the worst among the 11 S&P sectors.

The first couple of trading days last week saw P&G’s shares continue the slide begun the previous week when the company announced that it would pay $4.2 billion for Merck KGaA’s consumer health unit. And while the company beat first-quarter estimates when it reported results shortly after announcing the acquisition, organic sales growth of a mere 1% led company executives to note on the conference call the “rapid shifts to e-commerce” and tighter inventory management at retailers as part of P&G’s problem.

As if to underscore the issue, The Wall Street Journal on Wednesday ran a story on how Amazon is taking a heavy toll on consumer staples companies like P&G. With a threat of inflation rising according to some observers, companies that sell basic stuff like toothpaste and toilet paper are usually expected to outperform firms that sell discretionary goods like sneakers and toys.

This time, however, discount retailers like Amazon are making it difficult for P&G to raise prices on its top products. In P&G’s case, Gillette-brand grooming products are being hit hard by competition from discount razor blade sellers, and the company has been unable to figure out a way to go back to the good old used-to-be. Until P&G shows some sign that it has a clue of how to recover, the company’s stock will continue to get punished.

Procter & Gamble stock closed at $72.81 on Friday, up less than 0.1% for the day, in a 52-week range of $71.95 to $94.67. That low was posted Wednesday. The 12-month consensus price target on the stock is $81.79, down nearly $10 from the prior week, and the forward price-to-earnings ratio is 16.33.