PG beats and reaffirms 2025 outlook; Breaks out to test 200-day MA

Procter & Gamble (P&G) reported its fiscal Q2 2025 results, delivering earnings per share (EPS) of $1.88, surpassing the consensus estimate of $1.86, and achieving net sales of $21.88 billion, ahead of the expected $21.54 billion. Organic sales grew by 3%, exceeding analysts’ projections of 2.35%, while core EPS rose 2% year-over-year.

Segment Performance and Key Metrics

P&G’s Beauty segment posted a 2% organic sales increase, driven by strong performance in Hair Care and Personal Care, but offset by mid-single-digit declines in Skin Care, particularly in the Greater China market. The Grooming segment also grew by 2%, supported by innovation in razors and shaving products, although it fell slightly short of forecasts.

The Health Care division experienced a 3% rise in organic sales, below the anticipated 6.04%, as Oral-B and Pepto-Bismol performed steadily. Fabric & Home Care delivered a 3% increase, largely driven by volume growth in North America and a favorable geographic mix. The standout segment was Baby, Feminine & Family Care, which achieved a 4% rise in organic sales, fueled by strong demand for Charmin, Tampax, and Puffs, far exceeding expectations.

Overall, P&G reported a 2% increase in organic volume, more than doubling the 0.91% forecast, signaling a rebound in demand for household staples. However, the Beauty division faced a 1% decline in volume due to challenges in international markets.

Dollar Impact and Profitability

The impact of foreign exchange (FX) on sales was neutral, outperforming the anticipated -1.53% drag, which supported overall growth. However, the company highlighted ongoing cost pressures, including a $200 million after-tax commodity headwind for fiscal 2025. Gross margin slightly missed expectations at 52.4%, compared to the estimated 52.5%, as productivity savings were offset by unfavorable product mix and higher transportation costs.

P&G’s adjusted free cash flow reached $3.9 billion, below the $4.1 billion estimate, with adjusted free cash flow productivity at 84%. Despite the FX challenges and cost pressures, the company maintained strong cash returns, delivering $4.9 billion to shareholders through dividends and share buybacks during the quarter.

Guidance and Strategic Outlook

For fiscal 2025, P&G reiterated its guidance for organic sales growth of 3%-5% and core EPS growth of 5%-7%, projecting a core EPS range of $6.91 to $7.05. While the company anticipates continued headwinds from commodities and unfavorable tax impacts, it expressed confidence in its integrated growth strategy, which emphasizes product superiority, cost productivity, and geographic expansion.

CEO Jon Moeller reaffirmed the company’s focus on innovation and consumer value, highlighting progress in emerging markets and an agile response to evolving market conditions. P&G’s strategic investments in premium product lines and innovation-driven growth are expected to underpin future performance, even as macroeconomic uncertainties persist.

Conclusion

P&G’s Q2 2025 results reflect resilience in a challenging macroeconomic environment, with strong performances in core segments like Fabric & Home Care and Baby, Feminine & Family Care driving growth. The neutral FX impact provided a tailwind for international sales, though commodity costs and unfavorable mix weighed on margins. By maintaining its fiscal year guidance and continuing to innovate, P&G positions itself for sustained growth while delivering consistent shareholder returns. As the company navigates currency headwinds and cost challenges, its diverse product portfolio and strategic focus provide a solid foundation for long-term success.

Shares of PG are up 3% in pre-market trade following the results. Investors should have Staples on their radar as the group is starting to show signs of breaking out of its recent downtrend. The results from PG should help ease concerns around impact on Staples from the strong dollar.