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The Procter & Gamble Company (PG - Free Report) has reported strong results in second-quarter fiscal 2024, wherein earnings surpassed the Zacks Consensus Estimate. Sales and earnings improved year over year. The company’s organic sales grew, driven by robust pricing, along with strength across segments.
Procter & Gamble’s core earnings of $1.84 per share increased 16% from $1.59 in the year-ago quarter. The figure also beat the Zacks Consensus Estimate of $1.70. The strong bottom-line results have stemmed from improved sales, a higher operating margin and lower shares outstanding. Currency-neutral net earnings per share (EPS) rose 18% year over year.
The company has reported net sales of $21,441 million, up 3% year over year. Sales missed the Zacks Consensus Estimate of $21,545 million. The increase in sales can be attributed to growth across all segments. Currency negatively impacted net sales by 1%.
Procter & Gamble Company (The) Price, Consensus and EPS Surprise
On an organic basis (excluding the impacts of acquisitions, divestitures and foreign exchange), revenues improved 4% year over year, backed by a 4% rise in pricing, and flat product mix and volume.
Our model had predicted organic revenue growth of 6% for the fiscal second quarter, with a 6.6% gain from pricing, 1.3% growth from product mix and a 1.8% decline in volume.
Net sales increased 1% for Beauty, 6% for Grooming, 4% for Health Care, 5% for Fabric & Home Care, and 2% for the Baby, Feminine & Family Care segment. All the company’s business segments have reported growth in organic sales. Organic sales rose 1% for Beauty, 9% for Grooming, 6% for Fabric & Home Care, 2% for Health Care, and 3% for the Baby, Feminine & Family Care segment.
Shares of the company gained 1% in the pre-market session, following the solid bottom-line results. The Zacks Rank #3 (Hold) company’s stock has gained 4.4% in the past year compared with the industry’s 2.4% growth.
Image Source: Zacks Investment Research
Margins
In the reported quarter, the gross margin increased 520 basis points (bps) to 52.7%. Favorable currency rates aided the gross margin by 0.6%. The currency-neutral gross margin improved 590 bps to 53.4%. The increase in the gross margin was driven by 190 bps of pricing gains, 200 bps of favorable commodity costs and 240 bps of gross productivity savings. This was partly offset by a 40-bps impact of negative product mix, and 60 bps of product reinvestments and other impacts.
Core selling, general and administrative expenses (SG&A), as a percentage of sales, expanded 120 bps from the year-ago quarter to 25.7%. Currency hurt the SG&A expense rate by 0.1%. The SG&A expense rate increased 110 bps to 25.6% on a currency-neutral basis. The increase was driven by a 290-bps rise in reinvestments, offset by 100-bps of productivity savings, and an 80-bps net sales growth leverage and other impacts.
The core operating margin rose 400 bps from the prior year to 27%. Currency rates aided the operating margin by 0.7%. On a currency-neutral basis, the operating margin expanded 470 bps to 27.7%. The operating margin included gross productivity savings of 340 bps.
We had expected the core gross profit margin to expand 190 bps in the fiscal second quarter. The core SG&A expense rate was anticipated to increase 50 bps, while our core operating margin projection suggested growth of 140 bps.
Financials
Procter & Gamble ended second-quarter fiscal 2024 with cash and cash equivalents of $7,890 million, long-term debt of $23,096 million, and total shareholders’ equity of $48,829 million.
The company generated an operating cash flow of $10,004 million for the six months ended Dec 31, 2023, and an adjusted free cash flow of $4,283 million. Adjusted free cash flow productivity was 95% in the fiscal second quarter.
Procter & Gamble returned $3.3 billion of value to its shareholders in second-quarter fiscal 2024. This included $2.3 billion of dividend payouts and $1 billion of share buybacks.
FY24 Guidance
Management has maintained its sales view, and revised its core and GAAP EPS view for fiscal 2024. The company anticipates year-over-year all-in sales growth of 2-4% 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 1-2%.
Procter & Gamble expects reported EPS between a 1% decline and flat with last year’s reported number. Earlier, the company predicted GAAP EPS to increase 6-9% year over year. Notably, it posted $5.90 in fiscal 2023. Core EPS is expected to increase 6-9% year over year to $6.37-$6.43.
The current earnings view for fiscal 2024 includes an after-tax headwind of $800 million related to favorable commodity costs, net of adverse currency impacts. However, the company expects unfavorable currency rates to be a headwind of $1 billion after tax. Procter & Gamble expects the net impact of interest expenses and interest income to be a headwind of $100 million after tax.
The company projects a core effective tax rate of 21% for fiscal 2024. It expects a capital expenditure of 4% 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 carries a Zacks Rank #2 (Buy). CL has a trailing four-quarter earnings surprise of 3.6%, on average. The company has gained 6.5% in the past year.
The Zacks Consensus Estimate for Colgate’s current financial-year sales and EPS suggests growth of 7.9% and 8.1%, 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. CHD has a trailing four-quarter earnings surprise of 10.1%, on average. The company has risen 18% in the past year.
The Zacks Consensus Estimate for CHD’s current financial year’s sales and earnings suggests growth of 8.9% and 6.4%, respectively, from the prior-year reported numbers. The consensus mark for Church & Dwight’s EPS has been unchanged in the past 30 days.
Inter Parfums currently carries a Zacks Rank #2. IPAR has a trailing four-quarter earnings surprise of 45.7%, on average. The company has gained 20.7% in the past year.
The Zacks Consensus Estimate for Inter Parfums’ current financial year’s sales and EPS suggests growth of 20.9% and 19.7%, respectively, from the year-ago reported numbers. The consensus mark for IPAR’s EPS has been unchanged in the past 30 days.
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Procter & Gamble (PG) Beats Q2 Earnings Estimates, Ups EPS View
The Procter & Gamble Company (PG - Free Report) has reported strong results in second-quarter fiscal 2024, wherein earnings surpassed the Zacks Consensus Estimate. Sales and earnings improved year over year. The company’s organic sales grew, driven by robust pricing, along with strength across segments.
Procter & Gamble’s core earnings of $1.84 per share increased 16% from $1.59 in the year-ago quarter. The figure also beat the Zacks Consensus Estimate of $1.70. The strong bottom-line results have stemmed from improved sales, a higher operating margin and lower shares outstanding. Currency-neutral net earnings per share (EPS) rose 18% year over year.
The company has reported net sales of $21,441 million, up 3% year over year. Sales missed the Zacks Consensus Estimate of $21,545 million. The increase in sales can be attributed to growth across all segments. Currency negatively impacted net sales by 1%.
Procter & Gamble Company (The) Price, Consensus and EPS Surprise
Procter & Gamble Company (The) price-consensus-eps-surprise-chart | Procter & Gamble Company (The) Quote
On an organic basis (excluding the impacts of acquisitions, divestitures and foreign exchange), revenues improved 4% year over year, backed by a 4% rise in pricing, and flat product mix and volume.
Our model had predicted organic revenue growth of 6% for the fiscal second quarter, with a 6.6% gain from pricing, 1.3% growth from product mix and a 1.8% decline in volume.
Net sales increased 1% for Beauty, 6% for Grooming, 4% for Health Care, 5% for Fabric & Home Care, and 2% for the Baby, Feminine & Family Care segment. All the company’s business segments have reported growth in organic sales. Organic sales rose 1% for Beauty, 9% for Grooming, 6% for Fabric & Home Care, 2% for Health Care, and 3% for the Baby, Feminine & Family Care segment.
Shares of the company gained 1% in the pre-market session, following the solid bottom-line results. The Zacks Rank #3 (Hold) company’s stock has gained 4.4% in the past year compared with the industry’s 2.4% growth.
Image Source: Zacks Investment Research
Margins
In the reported quarter, the gross margin increased 520 basis points (bps) to 52.7%. Favorable currency rates aided the gross margin by 0.6%. The currency-neutral gross margin improved 590 bps to 53.4%. The increase in the gross margin was driven by 190 bps of pricing gains, 200 bps of favorable commodity costs and 240 bps of gross productivity savings. This was partly offset by a 40-bps impact of negative product mix, and 60 bps of product reinvestments and other impacts.
Core selling, general and administrative expenses (SG&A), as a percentage of sales, expanded 120 bps from the year-ago quarter to 25.7%. Currency hurt the SG&A expense rate by 0.1%. The SG&A expense rate increased 110 bps to 25.6% on a currency-neutral basis. The increase was driven by a 290-bps rise in reinvestments, offset by 100-bps of productivity savings, and an 80-bps net sales growth leverage and other impacts.
The core operating margin rose 400 bps from the prior year to 27%. Currency rates aided the operating margin by 0.7%. On a currency-neutral basis, the operating margin expanded 470 bps to 27.7%. The operating margin included gross productivity savings of 340 bps.
We had expected the core gross profit margin to expand 190 bps in the fiscal second quarter. The core SG&A expense rate was anticipated to increase 50 bps, while our core operating margin projection suggested growth of 140 bps.
Financials
Procter & Gamble ended second-quarter fiscal 2024 with cash and cash equivalents of $7,890 million, long-term debt of $23,096 million, and total shareholders’ equity of $48,829 million.
The company generated an operating cash flow of $10,004 million for the six months ended Dec 31, 2023, and an adjusted free cash flow of $4,283 million. Adjusted free cash flow productivity was 95% in the fiscal second quarter.
Procter & Gamble returned $3.3 billion of value to its shareholders in second-quarter fiscal 2024. This included $2.3 billion of dividend payouts and $1 billion of share buybacks.
FY24 Guidance
Management has maintained its sales view, and revised its core and GAAP EPS view for fiscal 2024. The company anticipates year-over-year all-in sales growth of 2-4% 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 1-2%.
Procter & Gamble expects reported EPS between a 1% decline and flat with last year’s reported number. Earlier, the company predicted GAAP EPS to increase 6-9% year over year. Notably, it posted $5.90 in fiscal 2023. Core EPS is expected to increase 6-9% year over year to $6.37-$6.43.
The current earnings view for fiscal 2024 includes an after-tax headwind of $800 million related to favorable commodity costs, net of adverse currency impacts. However, the company expects unfavorable currency rates to be a headwind of $1 billion after tax. Procter & Gamble expects the net impact of interest expenses and interest income to be a headwind of $100 million after tax.
The company projects a core effective tax rate of 21% for fiscal 2024. It expects a capital expenditure of 4% 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 carries a Zacks Rank #2 (Buy). CL has a trailing four-quarter earnings surprise of 3.6%, on average. The company has gained 6.5% 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 7.9% and 8.1%, 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. CHD has a trailing four-quarter earnings surprise of 10.1%, on average. The company has risen 18% in the past year.
The Zacks Consensus Estimate for CHD’s current financial year’s sales and earnings suggests growth of 8.9% and 6.4%, respectively, from the prior-year reported numbers. The consensus mark for Church & Dwight’s EPS has been unchanged in the past 30 days.
Inter Parfums currently carries a Zacks Rank #2. IPAR has a trailing four-quarter earnings surprise of 45.7%, on average. The company has gained 20.7% in the past year.
The Zacks Consensus Estimate for Inter Parfums’ current financial year’s sales and EPS suggests growth of 20.9% and 19.7%, respectively, from the year-ago reported numbers. The consensus mark for IPAR’s EPS has been unchanged in the past 30 days.