PG Stock Stays Flat After Q1 Earnings: Time to Reassess Your Position?
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Shares of The Procter & Gamble Company PG, also known as P&G, saw no movement following its first-quarter fiscal 2025 results on Oct. 18, 2024, reflecting mixed investor sentiment. Let us examine whether this is tied to the company’s fiscal first-quarter results, outlook or other factors.
Procter & Gamble’s fiscal first quarter was a mixed bag, with the company beating the Zacks Consensus Estimate for earnings per share (EPS) but missing on revenues. PG’s revenues fell 1% year over year, a sharp contrast to the 6% rise reported in the first quarter of fiscal 2024 and a slowdown from 2% growth in the fourth quarter of fiscal 2024. Organic sales grew 2% year over year, down from 7% in the first quarter of fiscal 2024 and 4% in the fourth quarter.
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Meanwhile, PG’s core EPS improved 5% year over year in first-quarter fiscal 2025, supported by pricing gains and productivity savings. The company is focused on enhancing productivity across its operations to fund investments, offset cost and currency challenges, and expand margins.
In first-quarter fiscal 2025, P&G’s core gross margin was flat year over year, but its currency-neutral gross margin improved by 10 basis points (bps), driven by 30 bps of pricing gains and 170 bps from productivity savings. The core operating margin also expanded by 30 bps, bolstered by 230 bps of gross productivity savings.
Additionally, the company’s bottom line was strengthened by continued volume and market share gains in North America. Organic sales in North America grew 4% in first-quarter fiscal 2025, driven by 4% volume growth. P&G's integrated strategy, which has driven strong results over the past six years, remains the foundation for balanced growth and value creation.
While the company has done a remarkable job in protecting its bottom line, backed by holistic cost-management initiatives, the significant slowdown in revenue growth requires further introspection.
What’s Behind the Slowdown in PG’s Sales?
Procter & Gamble has encountered several obstacles across its key regions in recent quarters, impacting its overall performance. Soft volume trends are evident in several enterprise markets across Europe, and the Asia-Pacific, Middle East and Africa regions, including Egypt, Saudi Arabia, Turkey, Indonesia, Malaysia and Russia. These markets have been particularly affected by geopolitical tensions, which have reduced consumer spending and slowed retail activity. Ongoing boycotts of Western brands in the Middle East add difficulties.
In Europe, P&G's focus markets have seen a notable slowdown, with average organic sales rising 7% over the past five quarters and volume growing 3%. In the first quarter of fiscal 2025, organic sales in Europe increased 3% compared with 50% growth in the prior-year quarter. The slowed sales were driven by inflation, currency devaluation and modest 4% volume growth in the European enterprise markets.
An analysis of other markets shows that Latin America's organic sales grew in the low-single digits, following strong 19% growth in the previous year. Brazil experienced mid-single-digit growth, while Mexico experienced steady growth compared with the prior year. Brazil and Mexico markets compared with strong 14% growth in the year-year quarter. Market conditions in the Asia-Pacific, Middle East and Africa region have been soft, with organic sales declining in the low-single digits.
PG also continued to struggle with further weakened market conditions and brand-specific headwinds on SK-II in Greater China — its second-largest market. As a result, organic sales in Greater China dropped 15% year over year in the fiscal first quarter. The soft market conditions in Greater China are mainly related to the ongoing economic challenges leading to lower consumer spending. Additionally, the brand-specific issues for its flagship beauty brand SK-II are influenced by the company’s Japanese heritage.
