Procter & Gamble Crushed Estimates, Stock Rose


Oct. 22 2019, Updated 2:58 p.m. ET

  • Procter & Gamble beat analysts’ estimates in the first quarter.
  • The company raised its fiscal guidance.
  • The stock rose due to the solid financial performance and upbeat outlook.

As we expected, Procter & Gamble (PG) posted impressive results for the first quarter of fiscal 2020 today. The company’s revenues and EPS beat analysts’ estimates due to continued strength in the base business. Buoyed by the stellar first-quarter performance, Procter & Gamble’s management raised the fiscal sales and EPS outlook. The higher outlook could drive the stock more. Notably, the stock was trading more than 4% higher in the pre-market session following the first-quarter results.

Procter & Gamble’s revenues continued to rise at a strong pace due to sustained momentum in the base business. The company’s margins expanded and the EPS beat analysts’ estimates by a wide margin.

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Procter & Gamble’s first-quarter results

Procter & Gamble posted revenues of $17.80 billion in the first quarter, up 7% YoY (year-over-year). Balanced growth in volumes and pricing supported the top-line growth, which beat analysts’ estimate of $17.42 billion.

Procter & Gamble’s organic sales increased 7% YoY, which reflected higher volumes (+4%) and pricing (+1%). Moreover, the favorable product mix added 2% to the company’s organic sales growth. Procter & Gamble’s organic sales improved across all of the segments due to stellar growth in beauty and health care. Premium innovation and the favorable product mix drove Procter & Gamble’s organic sales growth.

Sales leverage, higher pricing, lower commodity costs, and productivity savings cushioned Procter & Gamble’s margins, which continued to expand. The company’s core gross margins expanded by 190 basis points. Meanwhile, the core operating margin expanded by 260 basis points, which reflected higher gross margins and a lower SG&A expense rate.

Strong sales and stellar margins drove the company’s bottom line, which beat analysts’ estimates by a wide margin. The company posted an adjusted EPS of $1.37—up 22% YoY. Analysts expected Procter & Gamble to post an adjusted EPS of $1.24. Besides gaining from higher sales and margins, the company’s bottom line also got a boost from a decline by 340 basis points in the core effective tax rate.

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In comparison, Kimberly-Clark had impressive organic sales growth. The company’s third-quarter organic sales increased 4%, which reflected the higher pricing and mix. However, the volumes were still low. Notably, Kimberly-Clark’s third-quarter adjusted EPS of $1.84 beat analysts’ estimate of $1.80 and increased 7.6% YoY.

Stock rose due to the higher outlook

Procter & Gamble raised the fiscal sales and earnings outlook, which could lift its stock more. Now, the company expects total revenues and organic sakes to increase 3%–5%—up from earlier growth guidance of 3%–4%.

Meanwhile, the core EPS will likely increase 5%–10%—up from the previous expectation of 4%–9% growth.

In comparison, Kimberly-Clark also raised its fiscal sales and EPS outlook. The company’s organic sales will likely increase 3%–4%—up from the earlier growth guidance of 3%. Kimberly-Clark’s adjusted EPS will likely be $6.75–6.90—up from its previous guidance of $6.65–6.80.

Procter & Gamble stock could increase more in the coming days due to its exceptional first-quarter performance. Premium innovation, productivity savings, and favorable cost trends will likely boost the company’s sales, earnings, and stock.


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