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Procter & Gamble Delivers Mixed Q3 Results amid COVID-19

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Today, Procter & Gamble (NYSE:PG) announced better-than-expected earnings for the third quarter of fiscal 2020. The fiscal third quarter ended on March 31. However, the consumer staples giant missed sales expectations. Consumers stockpiled essentials due to COVID-19, which boosted the company’s sales. Meanwhile, foreign currency fluctuations had a negative impact on the company’s results.

Procter & Gamble stock has risen 1.1% as of 12:27 PM ET today.

Procter & Gamble’s Q3 earnings

The company’s third-quarter adjusted EPS grew 10.4% YoY (year-over-year) to $1.17. The adjusted EPS beat analysts’ estimate of $1.13. Strong sales and a higher adjusted operating margin boosted the company’s earnings. Procter & Gamble’s productivity cost savings drove margin improvement.

The company’s third-quarter sales grew 4.6% YoY to $17.21 billion. However, analysts expected sales of $17.46 billion. Excluding the impact of currency headwinds and acquisitions and divestitures, Procter & Gamble’s organic sales growth was 6%. Pandemic-led demand in North America and certain European markets boosted the company’s sales volumes during the quarter. Higher pricing had a one percent favorable impact on the company’s third-quarter sales growth.

Segment-wise performance

Procter & Gamble’s Fabric & Home Care segment delivered the highest sales growth rate among all of the segments. The segment’s organic sales rose by 10% in the quarter. Brands like Tide, Swiffer, and Mr. Clean saw higher demand due to increased hygiene needs.

The company’s Baby, Feminine & Family care segment delivered organic sales growth of 7%. The segment includes popular diaper brand Pampers. Meanwhile, the segment also includes paper towels, tissues, and toilet paper products under the Bounty, Charmin, and Puffs brands.

The Health Care segment’s organic sales rose by 9% YoY. The segment includes oral care brands like Crest and Oral-B. Notably, the segment also includes personal health care brands like Vicks. The company’s Beauty segment saw organic sales growth of only 1%. A double-digit decline in the company’s expensive SK-II brand due to retail market disruption in Asia hurt the segment’s sales. The Beauty segment was also impacted by a double-digit volume decline in hair care sales volume in China.

The Grooming segment’s organic sales fell by 1%. This segment includes popular brands like Gillette and Venus.

Procter & Gamble’s outlook

Procter & Gamble reduced its fiscal 2020 sales growth outlook to 3%–4% compared to the previous outlook of 4%–5%. The company’s revised guidance reflects the impact of higher currency headwinds. Procter & Gamble continues to expect organic sales growth of 4%–5%. The company also maintained its fiscal 2020 adjusted EPS growth guidance of 8%–11%.

While many companies have suspended dividends amid the current crisis, Procter & Gamble announced a 6% hike in its quarterly dividend per share to $0.79. The company announced the dividend on April 14. The increase marks the 64th consecutive year with a higher dividend. Procter & Gamble is a dividend king. The company has increased dividends for at least 50 consecutive years.

Procter & Gamble stock has fallen 2.7% year-to-date as of April 16. Colgate Palmolive (NYSE:CL), Kimberly Clark (NYSE:KMB), and Clorox (NYSE:CLX) have risen 5.8%, 1.6%, and 28%, respectively, in 2020. Overall, there’s a lot of uncertainty about whether the spike in demand for certain products will continue after the pandemic ends.

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