Is P&G's slow and steady improvement enough?

Procter & Gamble has presumably beat back activist investor Nelson Peltz, but it's under intensified pressure to deliver on its long-awaited turnaround.

Ten days after saying preliminary results show it won the proxy fight with hedge fund Trian Fund Management, the Cincinnati-based consumer products giant unveiled its latest quarterly results: a $2.9 billion profit on sales of $16.7 billion.

P&G's numbers narrowly beat Wall Street's forecasts on Friday, but the stock fizzled when the latest results didn't sizzle.

Instead, the staid maker of Tide detergent and Pampers diapers notched another quarter of slow-and-steady improvement and stuck with its sober fiscal outlook.

P&G shares dropped as low as $87.59, down 4.4 percent or $4 on Friday before closing at $88.25, down 3.7 percent.

Assuming P&G's tentative victory over Peltz holds, Wall Street analysts question if P&G's steady-as-she-goes rebound will be enough to ward off future challenges by Peltz or other investors.

"(Sales growth) was disappointing relative to expectations that the company would have had a stronger quarter given uncertainty regarding the proxy fight with Trian," wrote Stifel analyst Mark Astrachan, in a Friday note to investors.

Even though Peltz has so far failed to win a board seat, P&G shareholders will benefit from Peltz's continued involvement because it will keep pressure on the company to accelerate sales growth and cost cuts. Analysts said his stake also provides a "floor" for P&G's stock.

"We continue to believe that the set-up here for P&G remains a 'win-win' for shareholders given Trian's continued involvement in the stock," wrote Jefferies analyst Kevin Grundy, in a Friday note to investors. "Either P&G delivers results... OR we see it likely that Mr. Peltz publicly reasserts his case for bigger changes at the company."

Edward Jones analyst Jack Russo, however, doubts P&G will retool its turnaround strategy. He said CEO David Taylor is betting P&G's improving results will snowball.

"Don't look for them to change the playbook because David Taylor is a steady guy," Russo said.

Noticeably silent on Friday: Peltz, who declined comment through a spokesperson. His stake lost more than $100 million in value as the share price waned.

P&G had cautioned in July that its first-quarter results would face a tough comparison with a strong period last year. It also warned results might take a hit from lowering prices on Gillette razors that kicked off in spring.

The latest P&G results were a muddled mix of positives, negatives and special considerations:

• On the bright side: P&G delivered sales and profit growth a year after a strong quarter. Closely watched organic sales, which exclude the impact of foreign exchange, mergers or acquisitions, rose 1 percent. China's organic sales jumped 8 percent – a standout as the company's No. 2 market snapped back into shape.China's growth was so strong, it made up for flat U.S. organic sales and chief financial officer Jon Moeller hosted Friday's analyst call from Guangzhou, China.

There might be more good news from China in future quarters. The solid sales were despite a diaper drag as wholesalers burned off inventory just before a highly-anticipated new diaper launch in August.

P&G has been working hard in the past two years to turn China operations around. A $7 billion market, P&G badly stumbled by not offering enough upscale products.

• Causing concern: Analysts fretted over profit margins that got dinged by $100 million in extra commodity costs in the wake of hurricanes in September.

Razor sales also badly skidded, reflecting prices slashed in spring to win back lost market share. The grooming segment's organic sales were down 6 percent.

Moeller acknowledged U.S. growth has being hampered by a broader slowdown in some consumer staples, which has also tripped up P&G rivals, such as Unilever.

"The simple answer isn't very fulfilling which is that I really - we've been unable to put our finger on why this has been," Moeller told analysts, noting overall 2017 consumer spending is not down, but some spending on staple products has suffered.

P&G maintained its previous guidance that earnings per share would grow 5 to 7 percent, organic sales would rise 2 to 3 percent, while total sales would increase 3 percent. 

"We do not believe this can be wholly attributed to the weak results," wrote SunTrust analyst William B. Chappell, in a Friday note to investors. "We believe the weakness is part of the post proxy battle hangover as many investors who bid up the stock hoping for an activist win, are trying to figure out what to do with the shares."

Morningstar analyst Erin Lash shrugged off the doubts the quarter, saying the company delivered a needed sales increase.

"We’ve long maintained that P&G’s path to sustainable sales gains would prove lumpy," Lash wrote Friday. 

“We delivered organic sales growth in a decelerating global market and against a relatively strong base period. Market share trends continue to improve, with more of our top brands and countries holding or growing share," Taylor said in a statement. “First quarter sales and earnings results were in line with our going-in expectations."

How to get P&G's stock above $100 per share

P&G's results come days after the company disclosed a narrow victory in a proxy contest brought by investor Nelson Peltz. The hedge fund boss behind Trian Fund Management was seeking a seat on the board of directors to have greater influence over company strategy and top executives.

P&G: We're cutting price of Gillette razors

Peltz had harshly criticized the lumbering pace of the company's more than five-year-old turnaround efforts.

Activist investor to Enquirer: P&G's culture 'stifling'

Over the next several weeks, Delaware-based independent inspector of elections IVS Associates is reviewing votes in the proxy fight to determine an official tally.

Nelson Peltz lost P&G seat by less than 1 percent, may demand P&G recount