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The Procter & Gamble Company (PG - Free Report) has reported better-than-expected top and bottom lines in fourth-quarter fiscal 2023. Sales and earnings improved year over year. The company’s organic sales grew, driven by robust pricing and a favorable mix, along with strength across segments.
Procter & Gamble’s core earnings of $1.37 per share increased 13% from $1.21 in the year-ago quarter. The figure also beat the Zacks Consensus Estimate of $1.32. The strong bottom-line results have stemmed from improved sales, higher operating margin and lower shares outstanding. Currency-neutral net earnings per share (EPS) rose 22% year over year.
The company has reported net sales of $20,553 million, up 5% year over year. Sales surpassed the Zacks Consensus Estimate of $20,020 million. The increase in sales can be attributed to growth across all segments. Currency impacted net sales by 3%.
On an organic basis (excluding the impacts of acquisitions, divestitures and foreign exchange), revenues improved 8%, backed by a 7% rise in pricing and a 2% gain from a positive product mix, offset by a 1% decline in volume.
Our model had predicted organic revenue growth of 5.2% for the fiscal fourth quarter, with a 9.6% gain from price/mix and a 5.6% decline in volume.
Procter & Gamble Company (The) Price, Consensus and EPS Surprise
Net sales increased 8% for Beauty, 3% each for Grooming and Health Care, 5% for Fabric & Home Care, and 7% for the Baby, Feminine & Family Care segment. All the company’s business segments have reported growth in organic sales. Organic sales rose 11% for Beauty, 8% each for Grooming and the Fabric & Home Care segment, 5% for Health Care, and 9% for the Baby, Feminine & Family Care segment.
Shares of the company gained 1.7% in the pre-market session, following the better-than-expected top and bottom lines, and the robust fiscal 2024 view.
Shares of the Zacks Rank #3 (Hold) company have gained 9.5% in the past year compared with the industry’s 8% growth.
Image Source: Zacks Investment Research
Margins
In the reported quarter, the gross margin increased 380 basis points (bps) to 48.4%. Favorable currency rates aided the gross margin by 0.7%. The currency-neutral gross margin improved 450 bps to 49.1%. The increase in the gross margin was driven by 340 bps of pricing gains and 290 bps of gross productivity savings. This was partly offset by a 110-bps impact of contract material price increases, a 20-bps of product and package reinvestments, and a 50-bps impact of negative product mix and other impacts.
Selling, general and administrative expenses (SG&A), as a percentage of sales, expanded 190 bps from the year-ago quarter to 28.1%. Currency hurt the SG&A expense rate by 0.5%. The SG&A expense rate improved 140 bps to 27.6% on a currency-neutral basis. The increase was driven by 470 bps of marketing and overhead investments, offset by a 190-bps net sales growth leverage, and 140-bps of overhead savings and marketing efficiencies.
The operating margin rose 190 bps from the prior year to 20.3%. Currency rates aided the operating margin by 1.2%. On a currency-neutral basis, the operating margin expanded 310 bps to 21.5%.
We had expected core gross profit margin to expand 50 bps in the fiscal fourth quarter. Core SG&A expense rate was anticipated to decline 20 bps, while our core operating margin projection suggested growth of 140 bps.
Financials
Procter & Gamble ended fiscal 2023 with cash and cash equivalents of $8,246 million, long-term debt of $24,378 million, and total shareholders’ equity of $47,065 million.
The company generated an operating cash flow of $5,341 million in fourth-quarter fiscal 2023 and an adjusted free cash flow of $4,607 million. Adjusted free cash flow productivity was 136% in the fiscal fourth quarter. For fiscal 2023, the company generated an operating cash flow of $16,848 million, with an adjusted free cash flow of $14,011 million. Adjusted free cash flow productivity was 95% at the end of fiscal 2023.
Procter & Gamble returned $16 billion of value to its shareholders in fiscal 2023. This included $9 billion of dividend payouts and $7.4 billion of share buybacks.
FY23 Guidance
Management has provided an optimistic view for fiscal 2024. The company anticipates year-over-year all-in sales growth of 3-4% for fiscal 2024. Organic sales are likely to increase 4-5% in fiscal 2024. Currency movements are expected to negatively impact all-in sales growth by 1%.
The company expects reported EPS to increase 6-9% year over year to $6.25-$6.43. Notably, it reported $5.90 in fiscal 2023. The mid-point of the EPS view of $6.34 suggests a year-over-year increase of 7.5%.
The current earnings view includes after-tax benefits of $400 million related to favorable commodity and material costs, net of adverse currency impacts.
The company projects a core effective tax rate of 20% for fiscal 2024. It expects the capital expenditure to be 5% of net sales in fiscal 2024.
Adjusted free cash flow productivity is estimated to be 90% for fiscal 2024. The company intends to make dividend payments of more than $9 billion, along with share repurchases of $5-$6 billion in fiscal 2024.
Here’s How Better-Ranked Stocks Fared
We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Colgate-Palmolive (CL - Free Report) , Church & Dwight Co. (CHD - Free Report) and Inter Parfums (IPAR - Free Report) .
Colgate currently has a Zacks Rank #2 (Buy) and an expected long-term earnings growth rate of 6.2%. CL has a trailing four-quarter earnings surprise of 1.4%, on average. The company has declined 2% in the past year.
The Zacks Consensus Estimate for Colgate’s current financial-year sales and EPS suggests growth of 6.6% and 5.7%, respectively, from the year-ago reported numbers. The consensus mark for CL’s EPS has been unchanged in the past 30 days.
Church & Dwight currently carries a Zacks Rank of 2 and has an expected long-term earnings growth rate of 7.9%. CHD has a trailing four-quarter earnings surprise of 9.8%, on average. The company has risen 9.1% in the past year.
The Zacks Consensus Estimate for CHD’s current financial year’s sales and earnings suggests growth of 7.4% and 4.7%, respectively, from the prior-year reported numbers. The consensus mark for CHD’s EPS has moved up by a penny in the past seven days.
Inter Parfums currently carries a Zacks Rank #2. IPAR has a trailing four-quarter earnings surprise of 37.2%, on average. It has a long-term earnings growth rate of 15%. The company has gained 78.8% in the past year.
The Zacks Consensus Estimate for Inter Parfums’ current financial year’s sales and EPS suggests growth of 19.8% and 8.3%, respectively, from the year-ago reported numbers. The consensus mark for CHD’s EPS has moved up 1.2% in the past seven days.
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Procter & Gamble (PG) Rises on Q4 Earnings Beat, Robust View
The Procter & Gamble Company (PG - Free Report) has reported better-than-expected top and bottom lines in fourth-quarter fiscal 2023. Sales and earnings improved year over year. The company’s organic sales grew, driven by robust pricing and a favorable mix, along with strength across segments.
Procter & Gamble’s core earnings of $1.37 per share increased 13% from $1.21 in the year-ago quarter. The figure also beat the Zacks Consensus Estimate of $1.32. The strong bottom-line results have stemmed from improved sales, higher operating margin and lower shares outstanding. Currency-neutral net earnings per share (EPS) rose 22% year over year.
The company has reported net sales of $20,553 million, up 5% year over year. Sales surpassed the Zacks Consensus Estimate of $20,020 million. The increase in sales can be attributed to growth across all segments. Currency impacted net sales by 3%.
On an organic basis (excluding the impacts of acquisitions, divestitures and foreign exchange), revenues improved 8%, backed by a 7% rise in pricing and a 2% gain from a positive product mix, offset by a 1% decline in volume.
Our model had predicted organic revenue growth of 5.2% for the fiscal fourth quarter, with a 9.6% gain from price/mix and a 5.6% decline in volume.
Procter & Gamble Company (The) Price, Consensus and EPS Surprise
Procter & Gamble Company (The) price-consensus-eps-surprise-chart | Procter & Gamble Company (The) Quote
Net sales increased 8% for Beauty, 3% each for Grooming and Health Care, 5% for Fabric & Home Care, and 7% for the Baby, Feminine & Family Care segment. All the company’s business segments have reported growth in organic sales. Organic sales rose 11% for Beauty, 8% each for Grooming and the Fabric & Home Care segment, 5% for Health Care, and 9% for the Baby, Feminine & Family Care segment.
Shares of the company gained 1.7% in the pre-market session, following the better-than-expected top and bottom lines, and the robust fiscal 2024 view.
Shares of the Zacks Rank #3 (Hold) company have gained 9.5% in the past year compared with the industry’s 8% growth.
Image Source: Zacks Investment Research
Margins
In the reported quarter, the gross margin increased 380 basis points (bps) to 48.4%. Favorable currency rates aided the gross margin by 0.7%. The currency-neutral gross margin improved 450 bps to 49.1%. The increase in the gross margin was driven by 340 bps of pricing gains and 290 bps of gross productivity savings. This was partly offset by a 110-bps impact of contract material price increases, a 20-bps of product and package reinvestments, and a 50-bps impact of negative product mix and other impacts.
Selling, general and administrative expenses (SG&A), as a percentage of sales, expanded 190 bps from the year-ago quarter to 28.1%. Currency hurt the SG&A expense rate by 0.5%. The SG&A expense rate improved 140 bps to 27.6% on a currency-neutral basis. The increase was driven by 470 bps of marketing and overhead investments, offset by a 190-bps net sales growth leverage, and 140-bps of overhead savings and marketing efficiencies.
The operating margin rose 190 bps from the prior year to 20.3%. Currency rates aided the operating margin by 1.2%. On a currency-neutral basis, the operating margin expanded 310 bps to 21.5%.
We had expected core gross profit margin to expand 50 bps in the fiscal fourth quarter. Core SG&A expense rate was anticipated to decline 20 bps, while our core operating margin projection suggested growth of 140 bps.
Financials
Procter & Gamble ended fiscal 2023 with cash and cash equivalents of $8,246 million, long-term debt of $24,378 million, and total shareholders’ equity of $47,065 million.
The company generated an operating cash flow of $5,341 million in fourth-quarter fiscal 2023 and an adjusted free cash flow of $4,607 million. Adjusted free cash flow productivity was 136% in the fiscal fourth quarter. For fiscal 2023, the company generated an operating cash flow of $16,848 million, with an adjusted free cash flow of $14,011 million. Adjusted free cash flow productivity was 95% at the end of fiscal 2023.
Procter & Gamble returned $16 billion of value to its shareholders in fiscal 2023. This included $9 billion of dividend payouts and $7.4 billion of share buybacks.
FY23 Guidance
Management has provided an optimistic view for fiscal 2024. The company anticipates year-over-year all-in sales growth of 3-4% for fiscal 2024. Organic sales are likely to increase 4-5% in fiscal 2024. Currency movements are expected to negatively impact all-in sales growth by 1%.
The company expects reported EPS to increase 6-9% year over year to $6.25-$6.43. Notably, it reported $5.90 in fiscal 2023. The mid-point of the EPS view of $6.34 suggests a year-over-year increase of 7.5%.
The current earnings view includes after-tax benefits of $400 million related to favorable commodity and material costs, net of adverse currency impacts.
The company projects a core effective tax rate of 20% for fiscal 2024. It expects the capital expenditure to be 5% of net sales in fiscal 2024.
Adjusted free cash flow productivity is estimated to be 90% for fiscal 2024. The company intends to make dividend payments of more than $9 billion, along with share repurchases of $5-$6 billion in fiscal 2024.
Here’s How Better-Ranked Stocks Fared
We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Colgate-Palmolive (CL - Free Report) , Church & Dwight Co. (CHD - Free Report) and Inter Parfums (IPAR - Free Report) .
Colgate currently has a Zacks Rank #2 (Buy) and an expected long-term earnings growth rate of 6.2%. CL has a trailing four-quarter earnings surprise of 1.4%, on average. The company has declined 2% in the past year.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Colgate’s current financial-year sales and EPS suggests growth of 6.6% and 5.7%, respectively, from the year-ago reported numbers. The consensus mark for CL’s EPS has been unchanged in the past 30 days.
Church & Dwight currently carries a Zacks Rank of 2 and has an expected long-term earnings growth rate of 7.9%. CHD has a trailing four-quarter earnings surprise of 9.8%, on average. The company has risen 9.1% in the past year.
The Zacks Consensus Estimate for CHD’s current financial year’s sales and earnings suggests growth of 7.4% and 4.7%, respectively, from the prior-year reported numbers. The consensus mark for CHD’s EPS has moved up by a penny in the past seven days.
Inter Parfums currently carries a Zacks Rank #2. IPAR has a trailing four-quarter earnings surprise of 37.2%, on average. It has a long-term earnings growth rate of 15%. The company has gained 78.8% in the past year.
The Zacks Consensus Estimate for Inter Parfums’ current financial year’s sales and EPS suggests growth of 19.8% and 8.3%, respectively, from the year-ago reported numbers. The consensus mark for CHD’s EPS has moved up 1.2% in the past seven days.