What a difference a year makes for Procter & Gamble Co (PG.N) and CEO Bob McDonald.
Last February, he unveiled a $10 billion (6 billion pounds) restructuring including thousands of job cuts after the world's largest household products company admitted it was not nimble enough, especially in emerging markets.
In April, Wall Street analysts roasted McDonald on a conference call after P&G's latest profit warning and having to rescind some price increases. The dour performance prompted activist investor Bill Ackman to call for change last summer when he bought the shares.
Since then, McDonald has refocused the world's largest household products maker on winning back market share for products ranging from Gillette razors to Tide detergent.
On Friday, Procter & Gamble delivered its strongest indication yet that its turnaround efforts are paying off, posting a better-than-expected profit and improved forecasts, helped by U.S. hits such as Tide Pods and new hair care products under the Vidal Sassoon brand.
The results and rosy outlook - it was the first time the company raised its annual profit forecast since April 2010 - led to a 4 percent rise in P&G's stock price, setting a high for McDonald's 3-1/2 year tenure.
Even Ackman, who for months has blamed McDonald's team for earlier missteps, said on CNBC that the results were an indication of "very significant progress."
Friday's report showed better-than-expected profit, helped in part by a gain from an acquisition, and sales that surpassed expectations, with growth in all divisions. Even so, some analysts think the company still has more to accomplish.
"The results are pretty good, but you know what? We know we're not done yet, we know this is work in progress, we know we have more to do," McDonald said in an interview.
P&G's long-term goals, along with cutting costs and developing more innovative products, include getting sales to grow 1 to 2 percentage points ahead of the market pace.
"They've been stuck in the mud for years, and this is kind of a ray of hope for the company and they should be commended on the quarter," said Channing Smith, co-manager of the Capital Advisors Growth Fund (CIAOX.O). P&G represents 2 percent of that fund and the firm overall holds roughly 75,000 shares of P&G.
It has taken P&G months to reignite growth in sluggish markets such as the United States while also expanding in emerging markets, where products are typically less expensive.
P&G expects Tide Pods, the single-dose detergent launched in the United States in 2012, to become a $500 million brand this year. It says the premium-priced product is attracting both loyal Tide users and those who used to buy less expensive brands.
Tide Pods will be followed by an Ariel-branded version of the product in Europe this spring. Other launches this year include updated Pantene and Vidal Sassoon hair care products, as well as new versions of Bounty paper towels.
Last summer, Ackman's Pershing Square Capital Management bought P&G's shares and began pushing for more change.
While results have improved since then, P&G's growth still lags that of peers such as Unilever Plc (ULVR.L) (UNc.AS).
P&G's organic sales, which strip out the impact of divestitures and foreign exchange, grew 3 percent last quarter, while Unilever's sales rose 6.9 percent.
P&G's rivals such as Unilever, Colgate-Palmolive Co (CL.N) and Kimberly-Clark Corp (KMB.N) have done well in recent years while Procter struggled, and now perhaps it has the firepower to bounce back, said Edward Jones analyst Jack Russo.
"Procter's been left out of the party a little bit, so it's nice to see them reappear here and kind of exert their influence on the group," he said.
Ackman's Pershing Square has a 1.02 percent stake in P&G, making it the company's eighth-largest shareholder, according to Thomson Reuters data. Ackman said in the fall he understood the board wanted to give McDonald more time to repair years of damage.
"When the company is performing, obviously the pressure from Ackman will probably fade somewhat," said Capital Advisors' Smith, adding that while he does not know Ackman's intentions, it is clear that Ackman's investment in P&G is worth a lot more today than when he bought the shares.
Ackman spoke about P&G on CNBC on Friday, saying that over the last three years it "certainly looked like" McDonald was not the right person for the job. He added, "if the company can make dramatic progress - and I think this quarter is an indication of very significant progress - then I hope that Bob can be successful and can make it."
McDonald did not say whether he has spoken with Ackman lately, but said he considers it a great honour to lead P&G, which he joined in 1980.
"I'm totally focused on doing what I have to do," he said.
Even before Ackman took a stake, P&G was going through a $10 billion restructuring and other changes. It cut 5,500 nonmanufacturing jobs through December, near its goal of reducing 5,700 positions by the end of June.
Competitors such as Colgate and Kimberly-Clark are also trimming their ranks.
Meanwhile, rival Kimberly-Clark also posted a better-than-expected profit on Friday.
P&G has seen U.S. volume growth continue in January, said Chief Financial Officer Jon Moeller. At the same time, it believes it can improve market share in Europe over the next few months.
Some analysts still see room for improvement. Stifel Nicolaus analyst Mark Astrachan called the results "solid and encouraging," particularly the sales growth, but said P&G still lags in categories with strong growth trends, such as beauty.
P&G earned $4.06 billion, or $1.39 per share, in the fiscal second quarter ended in December, up from $1.69 billion, or 57 cents per share, a year earlier.
Stripping out unusual items such as restructuring charges and acquisitions, P&G earned $1.22 per share. That topped the company's own forecast of $1.07 to $1.13 per share and analysts' average target of $1.11, according to Thomson Reuters I/B/E/S.
Net sales rose 2 percent to $22.18 billion, topping analysts' forecast of $21.91 billion.
P&G expects fiscal 2013 core earnings of $3.97 to $4.07 per share, up from an earlier forecast of $3.80 to $4. Analyst estimates were at the bottom of that new range.
It expects organic sales to rise 3 to 4 percent this year, narrowing a prior forecast of 2 to 4 percent growth.
P&G also said it now plans to repurchase $5 billion to $6 billion in stock after calling for $4 billion to $6 billion in buybacks.
For the current quarter, P&G forecast core earnings per share of 91 to 97 cents, with sales up 3 to 4 percent. Analysts' average forecast was 95 cents per share.
Shares of P&G ended 4 percent higher at $73.25, the highest closing price since September 2008.
(Editing by Jeffrey Benkoe, Nick Zieminski and Matthew Lewis)
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