Image: P&G maintained its outlook for fiscal 2025, as shares flirt with all-time highs.
By Brian Nelson, CFA
On October 18, Procter & Gamble (PG) reported mixed first-quarter fiscal 2025 results with revenue coming in lower than the consensus forecast, while non-GAAP earnings per share edged out what the Street was looking for. Fiscal first quarter revenue fell 1% versus the prior year’s quarter, while organic sales advanced 2%, lapping 7% growth in the prior year period.
A one percent increase from higher pricing and a one percent increase in organic volume drove the organic sales increase. Organic sales were strong in its Grooming (+3%), Health Care (+4%), and Fabric & Home Care (+3%) segments, while Beauty (-2%) weighed on organic sales growth due to weakness in Skin Care, and its Baby, Feminine & Family Care segment had a neutral impact.
Management was upbeat in the press release:
Our organic sales growth, earnings and cash results in the first quarter keep us on track to deliver within our guidance ranges on all key financial metrics for the fiscal year. We remain committed to our integrated growth 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 have confidence this remains the right strategy to deliver balanced growth and value creation.
Reported operating income advanced 1% in the quarter versus the year-ago period, but P&G’s diluted net earnings per share dropped 12% in the quarter due in part to restructuring charges. Core earnings per share advanced 5% versus last year’s quarter. For the quarter, operating cash flow came in at $4.3 billion, while adjusted free cash flow productivity was 82%. P&G returned approximately $4.4 billion of cash to shareholders in the period, consisting of $2.4 billion in dividend payments and over $1.9 billion in share buybacks.
Looking to all of fiscal 2025, P&G maintained its guidance range of 2%-4% all-in sales growth for the year (organic sales growth guidance was maintained at 3%-5%). The company also maintained its fiscal 2025 diluted earnings per share growth guidance of 10%-12%, while core earnings per share growth is targeted in the range of 5%-7% ($6.91-$7.05 per share).
The company now expects higher commodity costs to weigh on earnings by $200 million for the fiscal year ($0.08 per share), and for the impact from foreign exchange to be roughly neutral. Another headwind to core EPS ($0.10-$0.12 per share) for fiscal 2025 is year-over-year items (minor brand divestitures and favorable tax impacts) that are unlikely to repeat to the same extent as they did in fiscal 2024.
For fiscal 2025, P&G expects adjusted free cash flow productivity to be 90% and to pay roughly $10 billion in dividends while buying back $6-$7 billion in shares. P&G’s quarterly update revealed some top-line pressure and expectations for higher commodity prices, but the company maintained its all-in sales guidance, organic growth guidance, diluted net earnings per share growth guidance, and core earnings per share guidance for fiscal 2025. Shares of P&G yield 2.4% at the time of this writing.
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Brian Nelson owns shares in SPY, SCHG, QQQ, DIA, VOT, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, RSP, SCHG, QQQ, and VOO. Some of the other securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.
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