Procter & Gamble (PG) Strong Brands Aid Growth Amid Inflation

Procter & Gamble PG has honed a successful strategy by focusing on key brands like Gillette and Ariel, effectively serving a broad customer base with an array of daily essentials. These brands have not only secured strong market positions but have also become household names. Central to the company's strategy is an emphasis on improving productivity and implementing cost-saving measures, aimed at augmenting margins to counterbalance the challenges posed by macroeconomic factors such as supply-chain fluctuations, higher SG&A expenses and inflation.

Resilient Fundamentals

Within Procter & Gamble's diverse portfolio, the Fabric Care and Home Care divisions are notably prominent, accounting for 35% of the company's total net sales. This segment experienced an 8% surge in revenues during the first quarter of fiscal 2024, alongside a significant increase in net earnings to $1,569 million, a performance surpassing that of the first quarter in fiscal year 2023.

In a similar vein, the Baby, Feminine and Family Care segment witnessed a 5% increase in net sales. Adding to these successes, P&G's strategic entry into the bedwetting category with Ninjamas marked a significant move, contributing 7% growth.

PG's leadership in the market, especially in laundry and fabric enhancers, is attributed to its innovation, superior product quality and focused consumer communication. The company is investing significantly in personal healthcare supply capabilities to sustain this growth.

In first-quarter fiscal 2024, PG’s financials were robust, with a 6% increase in net sales. Operating profit grew by 17% year over year and earnings before income taxes (EBIT) rose 16%. Organic sales growth was evident across different divisions of the company with Baby, Feminine & Family Care segment expanding by 7%, the Fabric and Home Care sector increasing by 9%, and the Health Care division leading with a 10% rise, primarily attributed to successful pricing tactics.


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Wrapping Up

Although volatility and challenges do exist in the external environment, management still expects organic sales growth of 4-5% for fiscal 2024. It foresees a 90% adjusted free cash flow productivity and plans to return a substantial amount of cash to shareholders.

Shares of this Zacks Rank #2 (Buy) company have gained 1.1% in the past six months against the industry's 0.1% decline. However, the company has underperformed the broader market’s 5.8% growth. The muted performance of the stock has cleared the deck for fresh buying opportunities. Also, the Zacks Consensus Estimate for current fiscal-year revenues and earnings paints a positive picture, suggesting 3.8% and 8.8% growth, respectively.

Other Key Picks

Colgate-Palmolive CL, an oral, personal, and home care products company, currently carries Zacks Rank #2. CL has shown a strong performance, with an average earnings surprise of 3.6% in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for CL’s current fiscal-year sales and earnings suggests growth of 7.9% and 8.1%, respectively, from the year-ago figures.

Clorox CLX manufactures and markets consumer and professional products worldwide. It currently carries a Zacks Rank #2. CLX delivered earnings surprise of 115.5% in the trailing four quarters, on average.

The Zacks Consensus Estimate for Clorox current fiscal-year sales and earnings indicates 5.3% and 9.8% decline from the year-ago period, respectively.

Newell Brands NWL engages in design, manufacture, sourcing, and distribution of consumer and commercial products worldwide. It currently sports a Zacks Rank #1. NWL delivered earnings surprise of 34.4% in the trailing four quarters, on average.

The Zacks Consensus Estimate for Newell’s 2024 sales and earnings implies 15.1% and 52.9% decline from the year-ago period, respectively.

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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.

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