The Procter & Gamble Company PG has reported first-quarter fiscal 2025 results, wherein earnings surpassed the Zacks Consensus Estimate and improved year over year. Meanwhile, sales missed the consensus mark and declined year over year. The company’s organic sales grew year over year, driven by robust pricing and improved organic volume.
Procter & Gamble’s core earnings of $1.93 per share increased 5% from the year-ago quarter and beat the Zacks Consensus Estimate of $1.90. Currency-neutral net earnings per share (EPS) rose 4% year over year.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
The company has reported net sales of $21.74 billion, down 1% year over year. Sales missed the Zacks Consensus Estimate of $21.93 billion. Soft sales can be attributed to a 1% decline each from adverse currency rates and other impacts (related to sales mix impacts of acquisitions and divestitures, and rounding impacts necessary to reconcile volume to net sales). The decline was partly negated by pricing gains of 1%. Volume and mix were flat each in the quarter.
Procter & Gamble Company (The) Price, Consensus and EPS Surprise
Procter & Gamble Company (The) Price, Consensus and EPS Surprise
Procter & Gamble Company (The) price-consensus-eps-surprise-chart | Procter & Gamble Company (The) Quote
On an organic basis (excluding the impacts of acquisitions, divestitures and foreign exchange), revenues rose 2% year over year, backed by improved pricing and a 1% increase in organic volume.
Our model predicted year-over-year organic revenue growth of 2.7% for first-quarter fiscal 2025, with a 1.7% gain from pricing, and 0.5% growth each in the product mix and organic volume.
The company’s net sales decline for the fiscal first quarter was mainly led by a year-over-year sales dip of 3% for the Beauty segment, followed by a 2% slip in the Baby, Feminine & Family Care segment. However, net sales improved 2% for Health Care, and 1% for the Fabric & Home Care segment. Meanwhile, net sales were flat for the Grooming segment.
Most of the company’s business segments reported growth in organic sales, except for the Beauty, and Baby, Feminine & Family Care segments, which fell 2% and 1% year over year, respectively. Organic sales rose 3% each for the Grooming, and Fabric & Home Care segments, and 4% for the Health Care segment.
Shares of the company declined 0.6% in the pre-market session following the soft top-line results. The Zacks Rank #3 (Hold) company’s stock has gained 2.6% in the past three months compared with the industry’s 4.6% growth.
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Taking a Look at Procter & Gamble's Q1 Margins
In the reported quarter, the core gross margin was flat year over year at 52%. Currency rates hurt the gross margin by 0.2%. The currency-neutral gross margin improved 10 bps to 52.1%. The increase in the gross margin was driven by 30 bps of pricing gains and a 170-bps benefit of gross productivity savings. This was partly offset by 90 bps of unfavorable commodity costs, a 60-bps impact of a negative mix and 40 bps of product reinvestments.
Core selling, general and administrative expenses (SG&A), as a percentage of sales, declined 30 bps from the year-ago quarter to 25.3%, while the currency-neutral SG&A rate increased 30 bps to 25.9%. The increase in currency-neutral SG&A rate was driven by 110 bps of reinvestments, offset by 60 bps of productivity savings and 20 bps of leverage from organic sales growth.
The core operating margin expanded 30 bps from the prior year to 26.7%. On a currency-neutral basis, the operating margin contracted year over year by 10 bps to 26.3%. The operating margin included gross productivity savings of 230 bps.
We had expected the core gross profit margin to expand 50 bps year over year in the fiscal first quarter. The core SG&A expense rate was anticipated to increase 40 bps for the fiscal first quarter, whereas our core operating margin projection suggested an increase of 10 bps.
A Peek Into PG's Financials
Procter & Gamble ended first-quarter fiscal 2025 with cash and cash equivalents of $12.2 billion, long-term debt of $25.7 billion, and total shareholders’ equity of $52.1 billion.
The company generated an operating cash flow of $4.3 billion and an adjusted free cash flow of $3.9 billion as of Sept. 30, 2024. The adjusted free cash flow productivity was 82% at the end of first-quarter fiscal 2025.
Procter & Gamble returned $4.4 billion of cash to its shareholders in first-quarter fiscal 2025. This included $2.4 billion of dividend payouts and $1.9 billion of share buybacks.
PG's FY25 Guidance
Management retained its view for fiscal 2025. The company anticipates year-over-year all-in sales growth of 2-4% for fiscal 2025. Organic sales are likely to increase 3-5% in fiscal 2025. Currency headwinds and divestitures are expected to negatively impact all-in sales growth by 1%.
Procter & Gamble expects the fiscal 2025 GAAP EPS to increase 10-12% from the $6.02 reported in fiscal 2024. Core EPS is expected to increase 5-7% year over year from a core EPS of $6.59 in fiscal 2024. The core EPS guidance suggests an EPS of $6.91-$7.05, with the mid-point at $6.98 per share. At the mid-point, the company expects core EPS to increase 6% year over year.
The EPS view for fiscal 2025 includes an after-tax headwind of $200 million related to unfavorable commodity costs. This is expected to create a drag of 8 cents per share on the core EPS. The impacts of currency on EPS is expected to be neutral. The company notes that the prior fiscal year included benefits from minor brand divestitures and tax impacts, which are unlikely to reoccur to the same extent in fiscal 2025, resulting in a headwind of 10-12 cents per share on the core EPS.
Procter & Gamble projects a core effective tax rate of 20-21% for fiscal 2025. It expects the capital expenditure to be 4-5% of net sales in fiscal 2025.
The adjusted free cash flow productivity is estimated to be 90% for fiscal 2025. The company intends to pay dividends worth $10 billion in fiscal 2025, with share repurchases of $6-$7 billion.
Here’s How Better-Ranked Stocks Fared
We highlighted better-ranked stocks from the broader Consumer Staples space, namely Unilever UL, Clorox CLX and Inter Parfums, Inc. IPAR.
Unilever is engaged in the manufacturing of branded and packaged consumer goods, including food, detergents and personal care products. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate Unilever’s current financial-year sales and EPS suggests growth of 1.7% and 8.5%, respectively, from the year-ago reported numbers. The consensus mark for UL’s EPS has moved up by a penny in the past 30 days.
Clorox is engaged in the production, marketing and sale of consumer products in the United States and international markets. It currently has a Zacks Rank #2 (Buy). CLX has a trailing four-quarter negative earnings surprise of 122.9%, on average.
The Zacks Consensus Estimate for CLX’s current financial year’s earnings suggests growth of 7.6% from the prior-year reported numbers. The consensus mark for CLX’s EPS has moved up by a penny in the past 30 days.
Inter Parfums is engaged in manufacturing, distributing and marketing a wide range of fragrances and related products. The company currently carries a Zacks Rank #2. IPAR has a trailing four-quarter earnings surprise of 2.5%, on average.
The Zacks Consensus Estimate for Inter Parfums’ current financial year’s sales and EPS suggests growth of 10.2% and 8.4%, respectively, from the year-ago reported numbers. The consensus mark for IPAR’s EPS has been unchanged in the past 30 days.
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