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Here's How Procter & Gamble (PG) is Placed for Q1 Earnings

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The Procter & Gamble Company (PG - Free Report) is set to report first-quarter fiscal 2022 results on Oct 19, before the opening bell. The Zacks Consensus Estimate for the company’s fiscal first-quarter earnings stands at $1.59 per share, indicating a 2.5% decrease from the year-ago quarter’s reported figure. However, the consensus mark has moved up by a penny in the past seven days.

For fiscal first-quarter revenues, the consensus mark is pegged at $19.8 billion, suggesting 2.6% growth from the prior-year quarter’s reported figure.

In the last reported quarter, the company delivered an earnings surprise of 4.6%. Its bottom line beat estimates by 8.5%, on average, over the trailing four quarters.

Procter & Gamble Company The Price and EPS Surprise


Procter & Gamble Company The Price and EPS Surprise

Procter & Gamble Company The price-eps-surprise | Procter & Gamble Company The Quote

Key Factors to Note

Procter & Gamble’s first-quarter fiscal 2022 results are expected to have benefited from continued strength in brands and appropriate strategies, which have been aiding organic sales growth. The company’s products play a key role in meeting the daily health, hygiene and cleaning needs of consumers around the world. All of its business segments are expected to have witnessed organic sales growth, driven by an increase in the shipment volume, favorable pricing and positive mix.

The company has been resilient in a tough environment, given its focus on productivity and cost-saving plans, which have been aiding its margins. Its continued business investments alongside efforts to offset macro cost headwinds and balanced top and bottom-line growth underscore its productivity efforts. It has been witnessing cost savings and efficiency improvements across all facets of business, driven by its second five-year (fiscal 2017-2021) $10-billion productivity program. Gains from productivity savings and pricing have been aiding its margins and bottom line and the trend is likely to have continued in the fiscal first quarter.

However, Procter & Gamble, like others in the industry, has been witnessing headwinds related to commodity cost inflation and higher freight costs along with increased reinvestment costs and unfavorable mix. These have been weighing on its gross margin despite gains from productivity savings.

On the last reported quarter’s earnings call, the company predicted higher commodity and freight costs to persist in fiscal 2022, based on the current industry dynamics. The company noted that input costs have risen sharply, particularly for materials like resins, chemicals and other ingredients, which have increased from 30% in April 2020 to 200% at the end of fourth-quarter fiscal 2021. With most of the material cost increases having occurred in calendar 2021, it expects higher commodity costs to disproportionately hurt results in the first half of fiscal 2022. This indicates prominent commodity cost headwinds in the fiscal first quarter.

Freight costs have increased significantly, owing to several factors impacting the supply of drivers and the demand for drivers and trucks. Higher freight costs have also resulted from the 35% increase in diesel fuel price in calendar 2021, indicating that pressures will continue to hurt the fiscal first-quarter results.

Zacks Model

Our proven model does not conclusively predict an earnings beat for Procter & Gamble this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, this is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Procter & Gamble has a Zacks Rank #2 and an Earnings ESP of -1.71%.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to deliver an earnings beat.

Archer Daniels Midland Company (ADM - Free Report) has an Earnings ESP of +1.84% and a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Estee Lauder Companies Inc. (EL - Free Report) presently has an Earnings ESP of +2.45% and a Zacks Rank #3.

The Coca-Cola Company (KO - Free Report) currently has an Earnings ESP of +0.99% and a Zacks Rank #3.