PG Earnings Preview: Watch the dollar impact on multinationals

Procter & Gamble (PG) is set to release its Q2 fiscal 2025 earnings results on Wednesday, January 22, before the market opens, accompanied by an investor call at 8:30 AM ET. Analysts expect earnings per share (EPS) of $1.86, reflecting a 1% year-over-year increase, while revenue is projected to remain flat at $21.6 billion. These estimates suggest a cautious outlook as the company grapples with foreign exchange volatility and logistical challenges. PG’s ability to meet or exceed these expectations will likely hinge on pricing strategies, consumer demand resilience, and efficiency in mitigating global headwinds.

The strong U.S. dollar presents a notable challenge for Procter & Gamble this quarter, as international sales account for a significant portion of its revenue. CFO Andre Schulten recently emphasized the impact of unfavorable exchange rates, particularly in regions like Brazil, adding pressure to the company's top-line growth. Compounding these challenges is a ransomware attack on its logistics partner, Blue Yonder, which disrupted supply chain operations. Despite these issues, PG’s robust pricing power and market leadership across its categories may help offset some of these pressures. Analysts will also monitor the company's performance in China and the Middle East, where prior quarters highlighted significant demand softness.

PG’s peers in the consumer staples sector have delivered mixed results, providing clues about broader industry trends. WD-40 outperformed with a 9.3% revenue increase, while Cal-Maine delivered an 82.5% year-over-year revenue surge, though stock reactions to these earnings were muted. In this context, PG’s results may set the tone for other multinational staples reporting soon, including Kimberly-Clark (KMB) and Colgate-Palmolive (CL). Investors will also be keen to assess PG’s commentary on emerging market demand, operational improvements, and pricing strategies.

Identifying the top multinational companies with significant U.S. dollar exposure involves considering firms that generate a substantial portion of their revenues from international markets. A strong U.S. dollar can negatively impact these companies by reducing the value of foreign earnings when converted back to dollars and potentially decreasing global demand due to higher relative pricing. According to a Reuters report, approximately 41% of S&P 500 companies' revenues come from abroad, highlighting the broad impact of dollar fluctuations on U.S. multinationals.

The following companies are known for their extensive international operations and, consequently, significant exposure to U.S. dollar strength:

1. Apple Inc.

2. Microsoft Corporation

3. Amazon.com, Inc.

4. Alphabet Inc.

5. Johnson & Johnson

6. Procter & Gamble Co.

7. Intel Corporation

8. Coca-Cola Company

9. PepsiCo, Inc.

10. IBM Corporation

It's important to note that the degree of exposure can vary based on factors like hedging strategies, geographic revenue distribution, and the competitive landscape in different markets. Companies often employ various financial instruments and operational tactics to mitigate the adverse effects of currency fluctuations on their financial performance.

Procter & Gamble’s previous quarter highlighted both challenges and resilience. In Q1, the company narrowly missed revenue estimates, reporting $21.74 billion versus expectations of $21.96 billion, as sales in China and the Middle East weighed on results. Organic sales growth was modest at 2%, supported by strength in North America and Europe. Margins improved slightly due to cost-cutting measures, with EPS beating estimates at $1.93. Management reiterated its fiscal year guidance of 3%-5% organic revenue growth and EPS between $6.91 and $7.05, though the front-loaded nature of fiscal headwinds tempered enthusiasm.

Looking ahead, PG’s fiscal 2025 guidance of 2%-4% revenue growth and an operating margin improvement of 100 basis points underscores its commitment to long-term profitability. The company’s focus on product innovation, such as SK-II’s launch in China and new offerings in home care, reflects a strategic pivot toward high-margin categories. PG’s efforts to leverage digital tools for supply chain enhancements and cost efficiencies will also be critical in driving shareholder value. As one of the largest global multinationals, PG’s results will serve as a bellwether for other companies exposed to currency fluctuations and global economic trends.

Ultimately, Procter & Gamble’s ability to navigate macroeconomic challenges and maintain consumer loyalty will be key themes as the company positions itself for sustainable growth in the second half of the fiscal year.