VALUATION HIGHLIGHTS

1. Fabric Care and Home Care constitutes 37% of the Trefis price estimate for Procter & Gamble's stock.
2. Baby & Family Care constitutes 24% of the Trefis price estimate for Procter & Gamble's stock.
3. Beauty constitutes 18% of the Trefis price estimate for Procter & Gamble's stock.

WHAT HAS CHANGED?

1. PG Stock Performance In Recent Years

In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, 24% in 2023, and 23% in 2024 - indicating that PG underperformed the S&P in 2021, 2023, and 2024.

2. Q1FY2026 Earnings

P&G reported net sales of $22.4 billion in Q1 2026, marking a 3% increase compared to the prior-year quarter. Organic sales grew 2%, driven by a 1% increase from higher pricing and a 1% gain from a favorable product mix, while organic volume remained neutral. Core EPS came in at $1.99, reflecting a 3% rise year-over-year.

Key Segment & Margin Drivers

Beauty Leading Growth: The Beauty segment was the strongest performer with 6% organic sales growth, fueled by innovation in Hair Care and Skin Care.

Operating Margins: The core operating margin remained unchanged versus the prior year. Strong productivity savings of 230 basis points were offset by higher commodity costs, new tariffs, and increased marketing reinvestments.

Shareholder Returns: The company returned $3.8 billion to shareholders during the quarter through $2.55 billion in dividends and $1.25 billion in share repurchases.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

P&G's EBITDA Margin: Driven by successful cost-saving initiatives, P&G's EBITDA margin saw a slight increase from 27.8% in 2020 to 28.6% in 2024. Looking ahead, we anticipate further margin expansion for P&G, fueled by its ambitious cost-savings program, a focus on productivity enhancements, and the divestment of underperforming brands. This margin improvement could lead to a 10% upside to our price forecast if P&G achieves an EBITDA margin of 34% by the end of our forecast period, compared to our current projection of around 30%.

BUSINESS SUMMARY

Procter & Gamble (P&G) is a multinational corporation operating in over 180 countries, producing and marketing a wide array of consumer goods across its core business segments: beauty, grooming, health care, household care, and baby care.

This extensive global presence, coupled with easy access to capital, empowers P&G to invest significantly in research and development (R&D), brand development, marketing initiatives, direct-to-consumer engagement, and comprehensive market research. Furthermore, P&G's established international network of retail channels provides a robust pathway to capitalize on high-growth opportunities within emerging markets by effectively reaching end consumers.

KEY TRENDS

Huge R&D budget and product innovation

With an annual R&D investment of around $3 billion, P&G significantly outspends its competitors, including Unilever. This robust investment fuels the regular launch of improved and innovative products, allowing P&G to maintain and grow its market share. Trefis views this focus on innovation, especially in premium segments, as vital for boosting profitability, considering P&G's already large scale and high market concentration in developed markets such as the U.S., Western Europe, and Japan.

Sustained marketing efforts to defend market share

P&G maintains a significant investment in advertising and brand promotion. Trefis considers P&G's strong advertising and marketing capabilities to be crucial for driving sales growth by keeping brands fresh and protecting its dominant market share.