Procter & Gamble (PG) reported its Q4 earnings, showing mixed results compared to analyst expectations. The company posted a core EPS of $1.40, beating the consensus estimate of $1.37, but net sales slightly missed forecasts, coming in at $20.53 billion versus the expected $20.74 billion.
Organic Sales, Pricing, and Volume
Organic revenue for the quarter grew by 2%, falling short of the 3.43% estimate. The price impact was also lower than expected at 1%, compared to the anticipated 2.28%. Organic volume growth, however, exceeded expectations, coming in at 2% versus the 0.31% estimate. This indicates that while pricing strategies were less impactful, the volume of goods sold improved, reflecting solid demand.
Segment Performance
- Beauty: Organic sales increased by 3%, slightly above the 2.59% estimate. This growth was driven by high single-digit increases in Hair Care due to favorable product mix and pricing.
- Grooming: This segment saw a 7% increase in organic sales, just under the 7.4% estimate. The growth was primarily due to higher pricing in Latin America and volume growth from innovation.
- Health Care: Organic sales grew by 4%, compared to the 4.65% estimate. Oral Care saw high single-digit growth due to a premium product mix and volume increases in North America and Europe.
- Fabric & Home Care: Organic sales were up 2%, falling short of the 3.85% estimate. Fabric Care remained flat due to increased promotional spending, while Home Care saw high single-digit growth from volume increases and favorable product mix.
- Baby, Feminine & Family Care: Organic sales declined by 1%, missing the 1.55% growth estimate. The Baby Care segment saw mid-single-digit declines in volume, while Feminine Care posted low single-digit growth driven by pricing and product mix.
Gross Margin and Operational Efficiency
PG's gross margin for the quarter was 49.6%, slightly above the 49.4% estimate. The core gross margin increased by 140 basis points year-over-year, driven by productivity savings and lower commodity costs. However, this was partially offset by unfavorable product mix and reinvestments in products and packaging.
FY25 Guidance
Looking ahead, PG provided an optimistic FY25 guidance:
- Core EPS: Projected to be in the range of $6.91 to $7.05, aligning closely with the analyst estimate of $6.96.
- Organic Revenue Growth: Expected to be between 3% to 5%, compared to the 3.86% consensus.
- Core EPS Growth: Anticipated to be between 5% to 7%, suggesting continued profitability improvements.
The company also expects to repurchase $6 to $7 billion of common shares in FY25 and forecasted sales growth in the range of 2% to 4%, in line with the 3.04% analyst expectation.
Market Reaction and Strategic Focus
Despite the mixed results, shares of PG fell 2.3% in premarket trading, reflecting investor concerns over weaker-than-expected sales in key segments and regions. The company has been focusing on launching new products like Tide Evo and Luvs Platinum Protection to cater to cost-conscious consumers, indicating a shift towards more value-driven offerings in response to market conditions.
### Commentary from Management
Management highlighted that the team met or exceeded plans for organic sales growth, core EPS growth, cash generation, and shareholder returns despite a challenging environment. PG remains committed to its integrated strategy focused on daily use categories, superior product performance, and operational efficiency. The company is optimistic about delivering sustainable, balanced growth and value creation in FY25.
In summary, while Procter & Gamble's Q4 results showed strength in certain areas, challenges in meeting revenue expectations and segment-specific performance variances led to cautious investor sentiment. However, the company's strong guidance for FY25 reflects confidence in its strategic initiatives and ability to navigate the current economic landscape.