Procter & Gamble Nears Low-Risk Buying Opportunity

Dow component Procter & Gamble Co. (PG) could offer superior returns for market players seeking a strong technical pattern and reliable dividend payout. The timing could be perfect because the stock just bounced at support generated by a 12-month cup and handle breakout in November, raising odds the 3-month correction is drawing to a close. Accumulation has barely budged during the downturn, indicating that shareholders have no intentions of jumping ship.

Cost-Cutting Programs Paying Off

The household goods giant is engaged in multiyear cost-cutting and reorganization focused on brand superiority that makes it easier to raise prices. That’s especially important right now, with rising inflation cutting into profit margins throughout the retail space. It’s also perfectly positioned to weather macro political tensions, scaling back Russian business operations and capital investment while continuing sales of basic health, hygiene, and personal care items.

Truist analyst Bill Chappell upgraded the stock to ‘Buy’ on Tuesday, noting “not only do we believe that PG has emerged stronger, but we also believe its focus on product superiority and consumers has accelerated migration to trusted brands over the past two years. As consumer behavior patterns return to a ‘new normal,’ investors will again be able to see PG’s operating momentum, and we believe the stock will therefore restart its period of outperformance”.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating based upon 10 ‘Buy’, 3 ‘Overweight’, 10 ‘Hold’, and 1 ‘Underweight’ recommendation. Price targets currently range from a low of $145 to a Street-high $187 while the stock is set to open Tuesday’s session about $22 below the median $174 target. This modest placement bodes well for continued upside off the corrective low but substantial gains may wait until we get closer to the Q2 earnings release on Apr. 20.

Procter & Gamble broke out above the February 2020 peak at 128.07 in July and rallied to 146.92 in November. It carved a cup and handle pattern into November 2021 and broke out, posting an all-time high at 165.32 in January. The stock broke down from range support at 156 in February, yielding a decline that reached breakout support and the 200-day moving average earlier this month. Positive action since that time has established a trading floor at that level. The company pays a 2.31% forward dividend yield.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.