Shares of Procter & Gamble soared on Thursday when it was revealed that Bill Ackman’s Pershing Square Capital held a huge stake in the consumer goods giant.Ackman, a legendary activist investor, is known for bringing big changes to the companies he invests in.
Experts expect no less this time around.
In a new note to clients, Morgan Stanley analyst Dara Mohsenian outlines three potential changes coming.
- More aggressive cost-cutting: Procter has already announced massive restructuring plans. But Mohsenian’s “analytical works shows that PG has more room for cost-cutting on the job cut/SG&A front, at the same time that goals under its existing program look too high.”
- Organizational changes: Mohensian think that management changes are coming. And she thinks that investors and analysts would welcome it.
- Strategic Actions: Divestitures or split ups wouldn’t be surprising. Procter recently divested its Pringles business. And in past investments, Ackman has pushed for splitting up companies.
On that last point, Mohensian believes a break-up of the company won’t happen, even though the media believes this is a strong possibility.
“We think a split is unlikely, but importantly, our sum-of-parts shows little upside in the stock even if a breakup occurred,” she wrote.
Mohsenian has an ‘equal-weight” rating on the stock.