P&G posts solid Q4 results, maintains pricing power, reaffirms 2024 revenue outlook

Consumer goods giant Procter & Gamble (PG) reported its second-quarter fiscal year 2024 earnings, showing a solid performance across various segments. The company delivered organic revenue growth, beating market expectations. 

In terms of organic revenue growth, P&G reported a 4% increase, slightly exceeding the estimated growth of 4.63%. This growth was driven by positive performances in most segments, including Beauty, Grooming, Fabric & Home Care, and Baby, Feminine & Family Care. Beauty, 

Grooming, and Fabric & Home Care segments posted strong organic sales growth of 1%, 9%, and 6% respectively, all surpassing market expectations. Health Care and Baby, Feminine & Family Care also recorded growth, though slightly below estimates with a 2% and 3% increase respectively.

P&G's strong performance can be attributed to a combination of factors, including higher pricing, favorable product mix , and volume growth. In the Beauty segment, increased pricing and product mix propelled organic sales growth, while in Grooming, higher pricing and premium product mix contributed to the strong performance. Fabric & Home Care benefited from increased pricing, favorable product mix, and volume growth driven by innovation. 

Although P&G experienced a decline in organic volume growth of -1%, as compared to the estimated growth of 1.11%, the overall organic revenue growth remained positive. The company's ability to offset volume declines with higher pricing and favorable product mix highlights its adaptability and resilience in a challenging market environment. 

P&G also demonstrated strong financial management, as evidenced by its gross margin expansion. The company achieved a gross margin of 52.7%, surpassing the estimated margin of 50.3%. Procter & Gamble witnessed a significant improvement in its gross margin by 520 basis points compared to the prior year, with 590 basis points of growth on a currency-neutral basis. This increase was driven by gross productivity savings (240 basis points), favorable commodity costs (200 basis points), and increased pricing (190 basis points). The positive effects were partially offset by product reinvestments and other impacts (40 basis points).

PG maintained its guidance for fiscal 2024 all-in sales growth to be in the range of 2% to 4%, with foreign exchange expected to be a headwind of approximately 1% to 2% to all-in sales growth. The company also maintained its outlook for organic sales growth in the range of 4% to 5%.

The fiscal 2024 diluted net earnings per share growth was adjusted from a range of 6% to 9% to a range of -1% to in-line with fiscal 2023 EPS of $5.90 due to the impairment of the Gillette intangible asset value and a two-year restructuring program. However, the company raised its fiscal 2024 core net earnings per share growth from a range of 6% to 9% to a range of 8% to 9% versus fiscal 2023 EPS. This outlook equates to a range of $6.37 to $6.43 per share.

Procter & Gamble continues to expect foreign exchange rates to be a headwind of approximately $1 billion after tax. The company now expects the net impact of interest expense and interest income to be a headwind of approximately $100 million after tax. The company still anticipates tailwinds of approximately $800 million after tax due to favorable commodity costs for fiscal year 2024.

P&G acknowledged the non-linear nature of its recovery in China, with Q2 sales in the region declining by 15%. While this challenges the company's growth prospects in the short term, P&G remains confident in its ability to navigate through the uncertain recovery path. 

In conclusion, P&G has delivered strong Q2 earnings, outperforming market expectations in terms of organic revenue growth.Despite the impact of the COVID-19 pandemic and sales challenges in China, the company has demonstrated its ability to adapt and sustain growth. With its resilient business model and focus on financial management, P&G is well-positioned for continued success in the consumer goods industry.