Procter & Gamble Q1 Results: Mixed Earnings Amid Market Challenges

Procter & Gamble (NYSE: PG) released its fiscal Q1 2025 results where revenues fell short of expectations, although earnings slightly exceeded estimates. The company reported revenues of $21.7 billion and adjusted earnings of $1.93 per share. These figures compared to estimates of $22.1 billion in revenue and $1.92 for earnings per share. Below, we take a closer look at the performance of P&G’s stock, highlight significant takeaways from its earnings report, and discuss valuation.

How Did P&G Fare In Q1?

P&G’s revenues of $21.7 billion marked a 1% decrease year-over-year. The company’s sales volume remained flat, while prices increased by 1%. This uplift in pricing did not fully counteract currency headwinds as well as changes from acquisitions and divestitures. Reviewing the different segments, Beauty sales dropped by 5%, largely due to lower demand in China. Within this category, Skin Care product sales fell by 20% because of reduced volume and an unfavorable product mix. Sales in the Grooming segment remained unchanged, and Health Care revenue rose by 2%, primarily due to a favorable product mix. Fabric & Home Care sales also improved by 1% thanks to volume gains. However, sales in Baby, Feminine & Family Care fell by 2%, driven by a high single-digit drop in baby product sales, as the company lost market share in diapers. P&G reported a 30 basis point increase in operating margin, bringing it to 26.7%. This margin improvement, alongside a slight reduction in shares outstanding, led to a 5% year-over-year increase in adjusted earnings per share. The company has upheld its organic sales growth outlook of 3% to 5% for 2025 and anticipated earnings per share will range from $6.91 to $7.05.

Implications for P&G Stock

Following the Q1 announcement, PG stock did not experience significant movement. Although the earnings exceeded expectations, concerns regarding declining Beauty segment sales may pose ongoing challenges, particularly with premium offerings in China.

Our valuation estimate for Procter & Gamble remains at $170 per share, aligning closely with its current market price. This forecast utilizes a 24x price-to-earnings (P/E) multiple for P&G, based on projected earnings of $6.94 per share on an adjusted basis for the entire fiscal 2025. This multiple is consistent with P&G’s average P/E ratio over the past five years.

So far this year, PG stock has increased by 18%, while the broader markets have seen gains of 23%. Over a longer timeframe, while fluctuations in PG stock have not been consistent, the overall returns have shown less volatility compared to the S&P 500.

Additionally, the Trefis High Quality (HQ) Portfolio, comprising 30 stocks, has demonstrated lower volatility than the S&P 500 but has outperformed the index annually during the same period. This is noteworthy as HQ Portfolio stocks have yielded higher returns while presenting lower risks compared to benchmark averages.

While PG stock appears to be fairly valued, it is beneficial to examine how Procter & Gamble’s peers perform when it comes to crucial financial metrics. Further valuable comparisons across industries can be found at Peer Comparisons.

[1] Returns as of 10/22/2024
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.