How Did P&G Fare In Q1?

Procter & Gamble (NYSE: PG) recently reported its Q1 fiscal 2025 results (P&G’s fiscal ends in June), with revenues missing and earnings slightly ahead of our estimates. The company reported revenue of $21.7 billion and adjusted earnings of $1.93 per share, compared to our estimates of $22.1 billion and $1.92, respectively. In this note, we discuss P&G’s stock performance, key takeaways from its recent results, and valuation.

How Did P&G Fare In Q1?

Procter & Gamble’s revenues of $21.7 billion reflected a 1% y-o-y decline. While the company saw its volume remain flat, pricing was up 1%. However, this was more than offset by forex headwinds and the impact from acquisitions and divestitures. Looking at segments, Beauty was down 5% due to lower volume in China. Within Beauty, sales for Skin Care products plunged 20% due to lower volume and unfavorable mix. Grooming sales were unchanged and Health Care revenue was up 2% mainly due to favorably product mix.  Fabric & Home Care sales were also up 1% on volume gains. Baby, Feminine & Family Care sales were down 2%, primarily due to a high single-digit decline in sales of baby products, as the company saw a decline in market share for its diapers. P&G reported a 30 bps improvement in operating margin to 26.7% in Q1. With margin growth and a slight decline in shares outstanding, P&G posted a 5% y-o-y growth in adjusted earnings per share. P&G has maintained its organic sales growth outlook of 3% to 5% in 2025, and earnings per share to be in the range of $6.91 and $7.05.

What Does This Mean For PG Stock?

PG stock didn’t see any meaningful change post Q1 announcement. Although the company posted an earnings beat, its lower Beauty segment sales warranted a concern and the situation may not change anytime soon, especially for its premium products in China.

We maintain our estimate for Procter & Gamble’s Valuation to be $170 per share, close to its current market price. Our forecast is based on a 24x P/E multiple for PG and expected earnings of $6.94 on a per share and adjusted basis for the full fiscal 2025. The 24x figure aligns with the stock’s average P/E multiple over the last five years.

PG stock has risen 18% this year, compared to 23% gains for the broader markets. Even if we look at a slightly longer period, the changes in PG stock, although, have been far from consistent, the returns were considerably less volatile than the S&P 500.

Similarly, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is less volatile. But, it has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

While PG stock looks appropriately priced, it is helpful to see how Procter & Gamble’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 10/22/2024
[2] Cumulative total returns since the end of 2016

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