The Procter & Gamble Company (PG Quick QuotePG - Free Report) looks like a promising bet on the back of its robust pricing actions, favorable mix and improved productivity, which have been aiding its performance for a while. The company’s focus on productivity and cost-saving plans positions it to drive margins in the future. Continued business investments also bode well.

Procter & Gamble continued its robust top and bottom-line surprise trend for the fourth consecutive quarter in fourth-quarter fiscal 2023. Sales and earnings also improved year over year. PG’s core earnings increased 13% year over year and currency-neutral EPS growth of 22%. The strong bottom-line results have stemmed from improved sales, higher operating margin and lower shares outstanding.

Shares of this Zacks Rank #3 (Hold) company have rallied 9.7% in the past year compared with the industry’s growth of 6.7%. The stock also compared favorably against the Consumer Staples sector’s decline of 4.6%.

The Zacks Consensus Estimate for PG’s current financial-year sales and earnings suggests growth of 4.5% and 8.3%, respectively, from the year-ago reported numbers.

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What’s Working Well for PG?

Procter & Gamble’s products play a key role in meeting consumers' daily health, hygiene and cleaning needs. The company witnessed a continued strong momentum in the fiscal fourth quarter, as reflected by the underlying strength in brands and appropriate strategies, which aided organic sales growth.

On an organic basis (excluding the impacts of acquisitions, divestitures and foreign exchange), revenues improved 8% in the fiscal fourth quarter, backed by a 7% rise in pricing and a 2% gain from a favorable product mix, offset by a 1% decline in volume. All the company’s business segments reported growth in organic sales. Organic sales rose 11% for Beauty, 8% each for the Grooming and Fabric & Home Care segments, 5% for Health Care and 9% for the Baby, Feminine & Family Care segment.

Procter & Gamble has provided an optimistic view for fiscal 2024, driven by robust quarterly results. 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. The company expects the reported EPS to increase 6-9% year over year to $6.25-$6.43. It reported $5.90 in fiscal 2023. The midpoint of the EPS view of $6.34 suggests a year-over-year increase of 7.5%.

Procter & Gamble has been focused on productivity and cost-saving plans to boost margins. PG’s continued investment in its businesses, alongside efforts to offset macro cost headwinds and balance top and bottom-line growth, underscores its productivity efforts. The company is witnessing cost savings and efficiency improvements across all facets of the business.

During fourth-quarter fiscal 2023, 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.

Also, the operating margin rose 190 bps from the prior year to 20.3% in the fiscal fourth quarter. Currency rates aided the operating margin by 1.2%. The operating margin expanded 310 bps to 21.5% on a currency-neutral basis.

Things to Watch Out

Procter & Gamble has been witnessing elevated SG&A expenses due to higher supply-chain costs, rising inflation, and elevated transportation expenses. SG&A expenses, as a percentage of sales, expanded 190 bps from the year-ago quarter to 28.1% in the fiscal fourth quarter. On a currency-neutral basis, the SG&A expense rate increased 140 bps to 27.6%, driven by 470 bps of marketing and overhead investments.

Procter & Gamble’s outlook for fiscal 2024 reflects supply-chain issues, higher transportation costs, geopolitical challenges, currency headwinds and rising inflation, which might impact consumer confidence.

Conclusion

Solid demand, brand strength and productivity efforts bode well and will likely help PG stay afloat despite cost headwinds and rising inflation. Also, a long-term earnings growth rate of 6.3% raises optimism about the stock.

Other Stocks to Consider

Some other top-ranked stocks from the broader Consumer Staples space are Inter Parfums (IPAR Quick QuoteIPAR - Free Report) , Helen of Troy (HELE Quick QuoteHELE - Free Report) and e.l.f. Beauty (ELF Quick QuoteELF - Free Report) .

Inter Parfums currently flaunts a Zacks Rank #1 (Strong Buy). IPAR has a trailing four-quarter earnings surprise of 45.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales and earnings suggests growth of 19.7% and 14.6%, respectively, from the year-ago reported numbers. The consensus mark for IPAR’s earnings per share has moved up 4.1% in the past 30 days.

Helen of Troy currently sports a Zacks Rank of 2 (Buy) and has an expected long-term earnings growth rate of 8%. HELE has a trailing four-quarter earnings surprise of 8.1%, on average.

The Zacks Consensus Estimate for Helen of Troy’s current financial-year sales and earnings suggests declines of 2.9% and 6.2%, respectively, from the prior-year reported numbers. The consensus mark for HELE’s earnings per share has been unchanged in the past 30 days.

e.l.f. Beauty currently has a Zacks Rank #2 and an expected long-term earnings growth rate of 21.7%. ELF has a trailing four-quarter earnings surprise of 108.3%, on average.

The Zacks Consensus Estimate for e.l.f. Beauty’s current financial-year sales and earnings per share suggests growth of 41.2% and 42.8%, respectively, from the year-ago reported numbers. The consensus mark for ELF’s earnings per share has moved up by a penny in the past 30 days.