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Procter & Gamble (PG) Q4 Earnings Beat, Stock Down on Sales Miss
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The Procter & Gamble Company (PG - Free Report) has reported fourth-quarter fiscal 2024 results, wherein earnings surpassed the Zacks Consensus Estimate and improved year over year. Meanwhile, sales missed the consensus mark and were flat year over year. The company’s organic sales grew year over year, driven by robust pricing and volume trends.
Procter & Gamble’s core earnings of $1.40 per share increased 2% from the year-ago quarter and beat the Zacks Consensus Estimate of $1.37. Currency-neutral net earnings per share (EPS) rose 6% year over year.
The company has reported net sales of $20.5 million, flat year over year. Sales missed the Zacks Consensus Estimate of $20.72 billion. The increase in sales can be attributed to increases in pricing and volume of 1% each, offset by a negative currency impact of 2%. On an organic basis (excluding the impacts of acquisitions, divestitures and foreign exchange), revenues rose 2% year over year, backed by improved pricing and volume.
Procter & Gamble Company (The) Price, Consensus and EPS Surprise
Our model predicted year-over-year organic revenue growth of 3.3% for the fiscal fourth quarter, with a 2.9% gain from pricing and 1.3% growth from the product mix, offset by a 0.8% decline in the organic volume. For fiscal 2024, we expect organic sales growth of 4.3%, driven by 4.2% gains from pricing and 0.6% benefit from a favorable mix, offset by a 0.7% decline in the organic volume.
The company’s flat net sales for the fiscal fourth quarter were mainly led by year-over-year sales growth of 3% for the Health Care segment, with flat sales for the Grooming, and the Fabric & Home Care segments. However, net sales declined 1% for Beauty and 3% for the Baby, Feminine & Family Care segment.
All of the company’s business segments have reported growth in organic sales, except for the Baby, Feminine & Family Care segment, which fell 1% year over year. Organic sales rose 3% for Beauty, 7% for Grooming, 2% for Fabric & Home Care, and 4% for the Health Care segment.
Shares of the company declined 4.1% in the pre-market session, following the soft top-line results. The Zacks Rank #3 (Hold) company’s stock has gained 4% in the past three months compared with the industry’s 6.3% growth.
Image Source: Zacks Investment Research
Margins
In the reported quarter, the core gross margin increased 140 basis points (bps) year over year to 49.8%. Currency rates hurt the gross margin by 0.4%. The currency-neutral gross margin improved 180 bps to 50.2%. The increase in the gross margin was driven by 40 bps of pricing gains, 100 bps of favorable commodity costs, and a 210-bps benefit from gross productivity savings. This was partly offset by a 130-bps impact of a negative product mix, and 40 bps of product reinvestments and other impacts.
Core selling, general and administrative expenses (SG&A), as a percentage of sales, expanded 240 bps from the year-ago quarter on both reported and currency-neutral basis to 30.5%. The increase was driven by 300 bps of marketing reinvestments and 30 bps of wage inflation and overhead investments, offset by 40 bps of productivity savings, and 50 bps of net sales growth leverage and other impacts.
The operating margin declined 100 bps from the prior year to 19.3%. Currency rates hurt the operating margin by 0.4%. On a currency-neutral basis, the operating margin contracted by 60 bps to 19.7%. The operating margin included gross productivity savings of 250 bps.
We had expected the core gross profit margin to expand 20 bps year over year in the fiscal fourth quarter. The core SG&A expense rate was anticipated to increase 80 bps for the fourth quarter, whereas our core operating margin projection suggested a decline of 60 bps.
Financials
Procter & Gamble ended fiscal 2024 with cash and cash equivalents of $9.5 billion, long-term debt of $25.3 billion, and total shareholders’ equity of $50.6 billion.
The company generated an operating cash flow of $19.8 billion and an adjusted free cash flow of $16.9 billion in fiscal 2024. Adjusted free cash flow productivity was 105% in fiscal 2024.
Procter & Gamble returned $14 billion of value to its shareholders in fiscal 2024. This included $9.3 billion of dividend payouts and $5 billion of share buybacks.
FY25 Guidance
Management has outlined its view for fiscal 2025. The company anticipates year-over-year all-in sales growth of 2-4% for fiscal 2025. Organic sales are likely to increase 3-5% in fiscal 2025. Currency movements are expected to negatively impact all-in sales growth by 1%.
Procter & Gamble expects GAAP EPS to increase 10-12% year over year for fiscal 2025 compared with $6.02 reported in fiscal 2024. Core EPS is expected to increase 5-7% year over year compared with core EPS of $6.59 in fiscal 2024. The core EPS guidance suggests an EPS range of $6.91-$7.05, with the mid-point at $6.98 per share. At mid-point, the company expects core EPS to increase 6% year over year.
The EPS view for fiscal 2025 includes an after-tax headwind of $500 million related to unfavorable commodity costs and adverse currency impacts. This headwind is likely to result in a drag of 20 cents per share or 3-5% on core EPS. Additionally, the company notes that the prior fiscal year included benefits from minor brand divestitures and tax impacts, which are unlikely to reoccur to the same extent in fiscal 2025, resulting in a headwind of 10-12 cents per share on the core EPS.
The company projects a core effective tax rate of 20-21% for fiscal 2025. It expects a capital expenditure of 4-5% of net sales in fiscal 2025.
The adjusted free cash flow productivity is estimated to be 90% for fiscal 2025. The company intends to pay dividends worth $10 billion in fiscal 2025, with share repurchases of $6-$7 billion.
Here’s How Better-Ranked Stocks Fared
We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Vital Farms (VITL - Free Report) , TreeHouse Foods (THS - Free Report) and e.l.f. Beauty (ELF - Free Report) .
Vital Farms offers a range of produced pasture-raised foods. It currently flaunts a Zacks Rank #1 (Strong Buy). VITL has a trailing four-quarter earnings surprise of 102.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate Vital Farms’ current financial-year sales and EPS suggests growth of 24.9% and 66.1%, respectively, from the year-ago reported numbers. The consensus mark for VITL’s EPS has moved up by a penny in the past seven days.
TreeHouse Foods, a manufacturer of packaged foods and beverages, currently sports a Zacks Rank of 1. THS has a trailing four-quarter negative earnings surprise of 4.5%, on average.
The Zacks Consensus Estimate for THS’s current financial year’s sales and earnings suggests declines of 1.6% and 8.5%, respectively, from the prior-year reported numbers. The consensus mark for THS’s EPS has been unchanged in the past 30 days.
e.l.f. Beauty, a cosmetic company, currently carries a Zacks Rank #2 (Buy). ELF has a trailing four-quarter earnings surprise of 54.6%, on average.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial year’s sales and EPS suggests growth of 25.9% and 7.2%, respectively, from the year-ago reported numbers. The consensus mark for ELF’s EPS has moved up by a penny in the past seven days.
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Procter & Gamble (PG) Q4 Earnings Beat, Stock Down on Sales Miss
The Procter & Gamble Company (PG - Free Report) has reported fourth-quarter fiscal 2024 results, wherein earnings surpassed the Zacks Consensus Estimate and improved year over year. Meanwhile, sales missed the consensus mark and were flat year over year. The company’s organic sales grew year over year, driven by robust pricing and volume trends.
Procter & Gamble’s core earnings of $1.40 per share increased 2% from the year-ago quarter and beat the Zacks Consensus Estimate of $1.37. Currency-neutral net earnings per share (EPS) rose 6% year over year.
The company has reported net sales of $20.5 million, flat year over year. Sales missed the Zacks Consensus Estimate of $20.72 billion. The increase in sales can be attributed to increases in pricing and volume of 1% each, offset by a negative currency impact of 2%. On an organic basis (excluding the impacts of acquisitions, divestitures and foreign exchange), revenues rose 2% year over year, backed by improved pricing and volume.
Procter & Gamble Company (The) Price, Consensus and EPS Surprise
Procter & Gamble Company (The) price-consensus-eps-surprise-chart | Procter & Gamble Company (The) Quote
Our model predicted year-over-year organic revenue growth of 3.3% for the fiscal fourth quarter, with a 2.9% gain from pricing and 1.3% growth from the product mix, offset by a 0.8% decline in the organic volume. For fiscal 2024, we expect organic sales growth of 4.3%, driven by 4.2% gains from pricing and 0.6% benefit from a favorable mix, offset by a 0.7% decline in the organic volume.
The company’s flat net sales for the fiscal fourth quarter were mainly led by year-over-year sales growth of 3% for the Health Care segment, with flat sales for the Grooming, and the Fabric & Home Care segments. However, net sales declined 1% for Beauty and 3% for the Baby, Feminine & Family Care segment.
All of the company’s business segments have reported growth in organic sales, except for the Baby, Feminine & Family Care segment, which fell 1% year over year. Organic sales rose 3% for Beauty, 7% for Grooming, 2% for Fabric & Home Care, and 4% for the Health Care segment.
Shares of the company declined 4.1% in the pre-market session, following the soft top-line results. The Zacks Rank #3 (Hold) company’s stock has gained 4% in the past three months compared with the industry’s 6.3% growth.
Image Source: Zacks Investment Research
Margins
In the reported quarter, the core gross margin increased 140 basis points (bps) year over year to 49.8%. Currency rates hurt the gross margin by 0.4%. The currency-neutral gross margin improved 180 bps to 50.2%. The increase in the gross margin was driven by 40 bps of pricing gains, 100 bps of favorable commodity costs, and a 210-bps benefit from gross productivity savings. This was partly offset by a 130-bps impact of a negative product mix, and 40 bps of product reinvestments and other impacts.
Core selling, general and administrative expenses (SG&A), as a percentage of sales, expanded 240 bps from the year-ago quarter on both reported and currency-neutral basis to 30.5%. The increase was driven by 300 bps of marketing reinvestments and 30 bps of wage inflation and overhead investments, offset by 40 bps of productivity savings, and 50 bps of net sales growth leverage and other impacts.
The operating margin declined 100 bps from the prior year to 19.3%. Currency rates hurt the operating margin by 0.4%. On a currency-neutral basis, the operating margin contracted by 60 bps to 19.7%. The operating margin included gross productivity savings of 250 bps.
We had expected the core gross profit margin to expand 20 bps year over year in the fiscal fourth quarter. The core SG&A expense rate was anticipated to increase 80 bps for the fourth quarter, whereas our core operating margin projection suggested a decline of 60 bps.
Financials
Procter & Gamble ended fiscal 2024 with cash and cash equivalents of $9.5 billion, long-term debt of $25.3 billion, and total shareholders’ equity of $50.6 billion.
The company generated an operating cash flow of $19.8 billion and an adjusted free cash flow of $16.9 billion in fiscal 2024. Adjusted free cash flow productivity was 105% in fiscal 2024.
Procter & Gamble returned $14 billion of value to its shareholders in fiscal 2024. This included $9.3 billion of dividend payouts and $5 billion of share buybacks.
FY25 Guidance
Management has outlined its view for fiscal 2025. The company anticipates year-over-year all-in sales growth of 2-4% for fiscal 2025. Organic sales are likely to increase 3-5% in fiscal 2025. Currency movements are expected to negatively impact all-in sales growth by 1%.
Procter & Gamble expects GAAP EPS to increase 10-12% year over year for fiscal 2025 compared with $6.02 reported in fiscal 2024. Core EPS is expected to increase 5-7% year over year compared with core EPS of $6.59 in fiscal 2024. The core EPS guidance suggests an EPS range of $6.91-$7.05, with the mid-point at $6.98 per share. At mid-point, the company expects core EPS to increase 6% year over year.
The EPS view for fiscal 2025 includes an after-tax headwind of $500 million related to unfavorable commodity costs and adverse currency impacts. This headwind is likely to result in a drag of 20 cents per share or 3-5% on core EPS. Additionally, the company notes that the prior fiscal year included benefits from minor brand divestitures and tax impacts, which are unlikely to reoccur to the same extent in fiscal 2025, resulting in a headwind of 10-12 cents per share on the core EPS.
The company projects a core effective tax rate of 20-21% for fiscal 2025. It expects a capital expenditure of 4-5% of net sales in fiscal 2025.
The adjusted free cash flow productivity is estimated to be 90% for fiscal 2025. The company intends to pay dividends worth $10 billion in fiscal 2025, with share repurchases of $6-$7 billion.
Here’s How Better-Ranked Stocks Fared
We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Vital Farms (VITL - Free Report) , TreeHouse Foods (THS - Free Report) and e.l.f. Beauty (ELF - Free Report) .
Vital Farms offers a range of produced pasture-raised foods. It currently flaunts a Zacks Rank #1 (Strong Buy). VITL has a trailing four-quarter earnings surprise of 102.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate Vital Farms’ current financial-year sales and EPS suggests growth of 24.9% and 66.1%, respectively, from the year-ago reported numbers. The consensus mark for VITL’s EPS has moved up by a penny in the past seven days.
TreeHouse Foods, a manufacturer of packaged foods and beverages, currently sports a Zacks Rank of 1. THS has a trailing four-quarter negative earnings surprise of 4.5%, on average.
The Zacks Consensus Estimate for THS’s current financial year’s sales and earnings suggests declines of 1.6% and 8.5%, respectively, from the prior-year reported numbers. The consensus mark for THS’s EPS has been unchanged in the past 30 days.
e.l.f. Beauty, a cosmetic company, currently carries a Zacks Rank #2 (Buy). ELF has a trailing four-quarter earnings surprise of 54.6%, on average.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial year’s sales and EPS suggests growth of 25.9% and 7.2%, respectively, from the year-ago reported numbers. The consensus mark for ELF’s EPS has moved up by a penny in the past seven days.