Procter & Gamble Downgraded by Evercore ISI Ahead of Earnings Report

Evercore ISI has lowered its rating for Procter & Gamble (PG.US) to "in line with the market" ahead of its earnings report. This downgrade comes as the firm anticipates that the company's guidance for the new fiscal year may fall short of market expectations. Evercore ISI predicts that Procter & Gamble will issue a guidance for organic sales growth of 1% to 3% for the 2026 fiscal year, which includes an approximate 50 basis points loss due to portfolio optimization rather than asset divestment. This guidance is likely to be lower than the market's consensus expectation of 2.4%.

Robert Ottenstein, an analyst at Evercore ISI, emphasized that the 2026 fiscal year guidance will cover a range of scenarios that are mild but widespread. He noted that macroeconomic pressures are temporary and that, unlike previous economic downturns, Procter & Gamble's product portfolio has expanded to include mid-tier competitive brands in price-sensitive categories, providing alternatives for consumers under pressure. Ottenstein highlighted concerns about unfavorable shifts in retail channels, which pose challenges to Procter & Gamble's growth potential. Notably, in the United States, Amazon currently accounts for 50% of the growth in all household and personal care products, resulting in a two or one percentage point growth gap compared to Procter & Gamble's core retailers, primarily Walmart and Costco. Despite this, Procter & Gamble maintains a competitive advantage in these core retailers due to its scale and product offerings.

Procter & Gamble is scheduled to release its fourth-quarter earnings report on July 29. Market expectations are set for revenue of 20.8 billion dollars and earnings per share of 1.42 dollars. The downgrade by Evercore ISI reflects a cautious outlook on Procter & Gamble's performance, suggesting that investors should be prepared for potential underperformance relative to broader market trends. This adjustment indicates a shift in sentiment towards the company, with analysts likely believing that the upcoming financial guidance will not meet the high expectations set by the market. This could be due to various factors, including challenges in the consumer goods sector, increased competition, or operational issues that Procter & Gamble may be facing.

Historically, Procter & Gamble has been a reliable performer in the market. However, the current economic environment and industry dynamics may be posing new challenges for the company. The downgrade by Evercore ISI serves as a warning to investors that Procter & Gamble may not be able to maintain its past performance levels in the near future. The rating of "in line with the market" suggests that Evercore ISI does not expect Procter & Gamble to outperform the broader market in the coming period. This rating implies that the company's stock is likely to move in tandem with the overall market, rather than providing the outperformance that investors may have anticipated. This adjustment could lead to a reassessment of Procter & Gamble's valuation by investors, potentially impacting the company's stock price.

Investors should closely monitor Procter & Gamble's upcoming earnings report and guidance for the new fiscal year. The company's performance and outlook will be crucial in determining whether the downgrade by Evercore ISI is justified. If Procter & Gamble's guidance falls short of expectations, it could further impact investor sentiment and the company's stock price. Conversely, if the company provides a more optimistic outlook, it could help to stabilize or even improve its stock performance. The upcoming earnings report will provide valuable insights into Procter & Gamble's strategic initiatives and its ability to navigate the current economic landscape. Investors will be looking for clarity on the company's growth prospects and its plans to address the challenges posed by the retail environment and competitive pressures.