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PG’s Top Line Growth Is Likely to Remain Low in the Second Half



Factors to impact PG’s top line

Procter & Gamble’s (PG) top line remained soft in the first half of fiscal 2019 as currency volatility continued to hurt it. However, strength in its base business impressed. Procter & Gamble’s organic sales increased 4% in the first half of fiscal 2019 driven by higher pricing and an improved mix. Its volumes also increased, supporting its organic sales growth.

We expect higher pricing and a favorable mix to continue to support the company’s organic sales growth in the second half of fiscal 2019. The Skin and Personal Care segment’s organic sales are expected to sustain momentum driven by premium innovations, higher pricing, and an improved mix. However, the Shave Care segment’s organic sales could remain weak, reflecting heightened competition and a decline in volumes following a price increase. Premium products are expected to support the Baby Care segment’s organic sales, but increased pricing and competition are likely to affect its volumes.

We expect Procter & Gamble’s net sales to benefit from the strength in its base business. However, currency volatility is expected to take a toll on its top line growth rate.

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In comparison, increased pricing is expected to support the organic sales growth rate of Colgate-Palmolive (CL) and Kimberly-Clark (KMB). However, these companies’ top lines are likely to decline in the first half of 2019. Meanwhile, the Clorox Company’s (CLX) and Church & Dwight’s (CHD) top lines are expected to benefit from innovations and higher pricing.

What Wall Street expects

Analysts’ consensus estimate indicates that Procter & Gamble’s top line is likely to mark low growth. Analysts expect Procter & Gamble’s net sales to stay flat in the third quarter of fiscal 2019. The company’s fiscal 2019 fourth-quarter sales are expected to mark a 1.4% rise. Adverse currency rates, heightened competition, and a negative impact on volumes resulting from higher pricing are expected to remain a drag.


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