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Procter & Gamble: Taking Off The Kid Gloves

Deutsche Bank's Bill Schmitz commented on Procter and Gamble's PG 0.36% new turnaround strategy, while taking back market share and re-strengthening its core brands. The analyst maintained his Buy rating and $95 price target.

"After several years of organic growth disappointments and relative under performance, company is taking off the kid gloves and aggressively reinvesting across brands, categories, countries and channels to get things moving in the right direction," said Schmitz.

The Deutsche Bank analyst cited category growth improvements, margin enhancements driven by volume growth and guidance for providing "plenty of cushion" making Proctor and Gamble "a relative winner, boosting earnings growth and multiple."

After meeting with management, Schmitz thought Procter and Gamble was putting in significant effort to have a balance between growth and profitability.

The Deutsche Bank analyst added, "Our take away, reading between the lines, is that this is the year company is going to make up for lost time, investing aggressively in advertising, innovation, channels and sales coverage to get the top line moving again, armed with $0.50 or more of earnings cushion relative to guidance to make the magic happen again."

Throwback to 2001

Shmitz thought the strategy "smelled" a lot like 2001-2004 when Proctor and Gamble went on its "last innovation and marketing driven land grab which was also, not surprisingly, the last time the company grew well above peers and the stock relatively outperformed the group."

Shmitz is among the best analyst's covering Proctor and Gamble with a 78 percent success rate and a +12.5 percent average return per recommendation. The analyst is ranked 63 out of 4110 analysts.

Proctor and Gamble traded at $86.73, up 0.49 percent Thursday.

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