Procter & Gambles misses organic sales expectations as pricing benefit fades

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Procter & Gamble Company (NYSE:PG) tracked slightly higher in early trading on Tuesday after posting a mixed FQ3 earnings report. Organic sale rose 3% during the quarter to miss the consensus estimate of +3.7%. Pricing was up 3% during the quarter, while volume and mix were flat compared to a year ago. EPS was up 18% year-over-year to $1.52 vs. $1.41 consensus and $1.37 a year ago.

The organic sales gain included a 2% increase for the Health Care segment, with prices up 4%. Oral Care organic sales increased mid-single digits due to premium product mix, partially offset by volume declines mainly in Asia Pacific and North America. Personal Health Care organic sales increased low single digits driven by increased pricing, partially offset by volume declines due to lower incidence of cough and cold.

Organic sales rose 3% in the Fabric and Home Care segment. Fabric Care organic sales increased low single digits due to increased pricing and favorable geographic mix due to growth in North America and Europe. Home Care organic sales increased high single digits due to increased pricing and volume growth from innovation.

Organic sales in the Baby, Feminine and Family Care segment were unchanged from a year ago. Baby Care organic sales decreased mid-single digits due primarily to pricing-related volume declines, partially offset by favorable product mix and devaluation-related price increases. Feminine Care organic sales increased low single digits driven by increased pricing and favorable product mix, partially offset by pricing-related volume declines. Family Care organic sales increased low single digits due to volume growth, partially offset by unfavorable product mix.

The Cincinnati-based consumer products giant’s core operating margin for the quarter increased 400 basis points on a currency-neutral basis. P&G highlighted that the increase was driven by benefits of 260 basis points from gross productivity savings, 130 basis points of favorable commodity costs and 130 basis points from increased pricing. These were partially offset by 100 basis points of unfavorable gross margin product mix and 20 basis points of product reinvestment and other impacts.

CEO update: “We remain committed to our integrated strategy of a focused product portfolio of daily use categories where performance drives brand choice, superiority — across product performance, packaging, brand communication, retail execution and consumer and customer value — productivity, constructive disruption and an agile and accountable organization. We are increasing investments in superiority to drive market growth and sustain strong momentum.”

Procter & Gamble (PG) guided for fiscal year 2024 all-in sales growth in the range of 2% to 4% to $83.65B to $85.29B vs. $84.8B consensus. EPS growth of +10% to +11% is anticipated vs. a prior forecast for +8% to +9%.

Shares of Procter & Gamble (PG) fell 0.27% in premarket action on Tuesday $156.86. The P&G update from management on the upcoming conference call could be of interest to Church & Dwight (CHD), Kimberly-Clark (KMB), Colgate-Palmolive (CL), and Clorox (CLX).