PG to sustain momentum in organic sales

Procter & Gamble (PG) impressed with its underlying sales growth rate in the first half of fiscal 2019. We expect this growth trend to continue in the third quarter of fiscal 2019 driven by an increase in pricing across all the company’s business segments. Meanwhile, a favorable mix and premium innovations should further support the company’s organic sales growth.

Procter & Gamble’s Beauty segment is likely to gain from improvements in volumes and pricing. Within the Beauty segment, the skin and personal care categories are projected to mark strong growth led by premium innovations and a favorable product mix.

Improved Pricing and Mix to Drive PG’s Q3 Organic Sales

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Higher pricing and innovations are also expected to drive the organic sales growth in the company’s Health and Fabric and Home Care segments. Higher pricing is likely to support organic sales in its Grooming and Baby Care segments. However, its volumes could take a hit owing to higher pricing amid heightened competition.

We expect Procter & Gamble’s organic sales to benefit from higher pricing. However, uncertainty about its volumes could limit its growth rate. Meanwhile, Procter & Gamble’s top line could stay low, reflecting adverse currency rates.

Consensus estimate

Analysts expect Procter & Gamble to post net sales of $16.3 billion, which implies marginal improvement on a YoY (year-over-year) basis. Analysts expect adverse currency fluctuations to offset the benefits of improved pricing and mix.

In comparison, currency volatility is likely to hurt the net sales growth rates of other major household and personal care product manufacturers. Kimberly-Clark’s (KMB) and Colgate-Palmolive’s (CL) top lines are expected to see declines in the near term.

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