Proctor & Gamble (PG, Financial) shares experienced a lull today, reflecting the company's flat volume growth year-over-year in Q3, marking a second quarter of stagnation. Despite this, PG surpassed earnings expectations for the third consecutive time, thanks to productivity improvements and beneficial deflationary trends. Furthermore, the company uplifted its FY24 (Jun) EPS growth forecast while maintaining its revenue growth projection of +2-4%.
Despite these positive indicators, PG's stock had already seen a 10% rise this year, reaching one-year highs last month, which meant much of the Q3 optimism was already factored into its price. The market was looking for a boost in volume growth, which has been missing despite some categories like Beauty, Grooming, and Fabric & Home Care showing improvement.
- Volume growth in certain categories couldn't offset the 4% and 3% declines in Health Care and Baby, Feminine & Family Care, respectively, leading to an overall flat performance.
- Price increases drove a 0.6% revenue growth to $20.2 billion, with organic sales growth slightly below last quarter at 3% year-over-year.
- Growth was evident in Latin America, particularly Mexico and Brazil, with organic sales growth in the +20s and +30s, while North America saw a modest 3% increase in organic sales.
- Challenges persisted in China and the Middle East due to weak market conditions and soft demand, respectively.
- Nonetheless, PG's bottom line grew by 10.9% year-over-year to $1.52, buoyed by productivity gains and a $900 million tailwind from falling commodity prices, leading to an increased FY24 EPS growth forecast of +10-11%.
Despite Q3's mixed results, PG's management remains optimistic about stable consumption trends and the potential for recovery in China and easing tensions in the Middle East. PG continues to be a company to watch in the coming quarters.
