The Procter & Gamble Company PG has reported second-quarter fiscal 2025 results, wherein sales and earnings surpassed the Zacks Consensus Estimate and improved year over year. The company’s organic sales grew year over year, driven by a robust geographic mix and an improved organic volume. PG achieved accelerated organic sales increase, core earnings per share (EPS) growth and robust cash returns to shareholders in second-quarter fiscal 2025.
Procter & Gamble’s core earnings of $1.88 per share increased 2% from the year-ago quarter and beat the Zacks Consensus Estimate of $1.86. Currency-neutral core EPS rose 3% year over year.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
The company has reported net sales of $21.9 billion, up 2% year over year. Sales beat the Zacks Consensus Estimate of $21.6 billion. The better-than-expected sales performance can be attributed to 1% growth each from volume and geographic mix. Meanwhile, pricing, currency and other impacts (related to sales mix impacts of acquisitions and divestitures, and rounding impacts to reconcile volume to net sales) were flat each in the reported quarter.
Procter & Gamble Company (The) Price, Consensus and EPS Surprise
Procter & Gamble Company (The) price-consensus-eps-surprise-chart | Procter & Gamble Company (The) Quote
On an organic basis (excluding the impacts of acquisitions, divestitures and foreign exchange), revenues rose 3% year over year, backed by a 2% increase in the organic volume. Our model predicted year-over-year organic revenue growth of 2% for second-quarter fiscal 2025, with a 1.4% gain from pricing, 0.5% growth in the product mix, and a 0.1% rise in the organic volume.
The company’s net sales growth for the fiscal second quarter was led by a year-over-year improvement of 3% in the Baby, Feminine & Family Care segment, followed by 2% gains each for the Health Care, and the Fabric & Home Care segments. Meanwhile, net sales improved 1% in the Grooming segment and were flat for the Beauty segment.
All of the company’s business segments reported growth in organic sales. Organic sales rose 4% for the Baby, Feminine & Family Care segment; 3% each for the Health Care and Fabric & Home Care segments; and 2% each for the Grooming and Beauty segments.
Shares of the company rose 3.3% in the pre-market session following the robust second-quarter fiscal 2025 results and solid outlook. The Zacks Rank #3 (Hold) company’s stock has lost 4.7% in the past three months compared with the industry’s 5.4% decline.
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Taking a Look at Procter & Gamble's Q2 Margins
In the fiscal second quarter, the core and reported gross margin declined 30 basis points (bps) year over year to 52.4%. Currency rates hurt the gross margin by 0.1%. The currency-neutral gross margin contracted 20 bps to 52.5%. The decline in the gross margin was led by 110 bps of unfavorable mix, 50 bps of negative commodity costs, and 40 bps of impacts of product reinvestment and transportation service costs. This was partly negated by 30 bps of pricing gains and a 150-bps benefit of gross productivity savings.
Core selling, general and administrative expenses (SG&A), as a percentage of sales, increased 50 bps from the year-ago quarter to 26.2%, while the currency-neutral SG&A rate rose 30 bps to 26%. The increase in the currency-neutral SG&A rate was driven by 210 bps of reinvestments, offset by 110 bps of productivity savings, 60 bps of leverage from net sales growth and 10 bps of other savings.
The core operating margin contracted 80 bps from the prior year to 26.2%. On a currency-neutral basis, the operating margin contracted year over year by 50 bps to 26.5%. The operating margin included gross productivity savings of 260 bps.
We expected the core gross profit margin to contract 10 bps year over year in the fiscal second quarter to 47.2%. The core SG&A expense rate was anticipated to decline 30 bps for the fiscal second quarter, whereas our core operating margin projection suggested an increase of 50 bps to 27.5%.
Peek Into PG's Financials
Procter & Gamble ended second-quarter fiscal 2025 with cash and cash equivalents of $10.2 billion, long-term debt of $25.3 billion, and total shareholders’ equity of $51.4 billion.
The company generated an operating cash flow of $4.8 billion and an adjusted free cash flow of $3.9 billion for the three months ended Dec. 31, 2024. The adjusted free cash flow productivity was 84% at the end of second-quarter fiscal 2025.
Procter & Gamble returned more than $4.9 billion in cash to its shareholders in second-quarter fiscal 2025. This included $2.4 billion in dividend payouts and $2.5 billion in share buybacks.
PG's FY25 Guidance
The company noted that its strong first-half fiscal 2025 results place it on track to achieve its previously stated guidance for fiscal 2025. Hence, management retained its view for fiscal 2025. The company anticipates year-over-year all-in sales growth of 2-4% for fiscal 2025. Organic sales are likely to increase 3-5% in fiscal 2025. Currency headwinds and divestitures are expected to negatively impact all-in sales growth by 1%.
Procter & Gamble expects the fiscal 2025 GAAP EPS to increase 10-12% from the $6.02 reported in fiscal 2024. Core EPS is expected to rise 5-7% year over year from a core EPS of $6.59 reported in fiscal 2024. The core EPS guidance growth guidance suggests an EPS range of $6.91-$7.05, with the mid-point at $6.98. At the mid-point, the company expects core EPS to increase 6% year over year.
The EPS view for fiscal 2025 includes an after-tax headwind of $200 million related to unfavorable commodity costs. The company anticipates unfavorable foreign exchange rates to create an after-tax headwind of $300 million. The unfavorable commodity costs and currency rates are expected to impact the core EPS by 20 cents per share.
PG also notes that the prior fiscal year included benefits from minor brand divestitures and tax impacts, which are unlikely to reoccur to the same extent in fiscal 2025, resulting in a headwind of 10-12 cents per share on the core EPS.
Procter & Gamble projects a core effective tax rate of 20-21% for fiscal 2025. It expects the capital expenditure to be 4-5% of net sales in fiscal 2025.
The adjusted free cash flow productivity is estimated to be 90% for fiscal 2025. The company intends to pay dividends worth $10 billion in fiscal 2025, with share repurchases of $6-$7 billion.
Here’s How Better-Ranked Stocks Fared
We highlighted better-ranked stocks from the broader Consumer Staples space, namely Clorox CLX, Energizer ENR and Ollie's Bargain Outlet OLLI.
Clorox is engaged in the production, marketing and sale of consumer products in the United States and international markets. It currently has a Zacks Rank #2 (Buy). CLX has a trailing four-quarter earnings surprise of 45.9%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for CLX’s current financial year’s earnings suggests growth of 11.4% from the prior-year reported number. The consensus mark for CLX’s EPS has been unchanged in the past 30 days.
Energizer is one of the world’s leading manufacturers and distributors of batteries and lighting products. It currently has a Zacks Rank #2. ENR has a trailing four-quarter earnings surprise of 8.3%, on average.
The Zacks Consensus Estimate Energizer’s current financial-year sales and EPS suggests growth of 1.3% and 7.8%, respectively, from the year-ago reported numbers. The consensus mark for ENR’s EPS has been unchanged in the past 30 days.
Ollie's is a value retailer of brand-name merchandise at drastically reduced prices. The company currently carries a Zacks Rank #2. OLLI has a trailing four-quarter earnings surprise of 5%, on average.
The Zacks Consensus Estimate for Ollie's current financial year’s sales and EPS suggests growth of 8.3% and 13.1%, respectively, from the year-ago reported numbers. The consensus mark for OLLI’s EPS has been unchanged in the past 30 days.
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Procter & Gamble Company (The) (PG) : Free Stock Analysis Report
Energizer Holdings, Inc. (ENR) : Free Stock Analysis Report
The Clorox Company (CLX) : Free Stock Analysis Report
Ollie's Bargain Outlet Holdings, Inc. (OLLI) : Free Stock Analysis Report
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