What To Expect From Procter & Gamble’s Q2 Earnings

Procter & Gamble (NYSE: PG) is scheduled to announce its fiscal second quarter results on Tuesday, January 23. The company reported mixed fiscal first quarter earnings, as its earnings per share came in ahead of market expectations but revenue missed. In Q1, the company’s net sales grew 1% year-over-year (y-o-y), driven by growth in the Beauty, Fabric & Health Care segments, partially offset by declines in the Grooming, Baby and Feminine Care businesses. In addition, the company’s organic sales were up 1% on 1% volume growth, with flat pricing and mix across all segments. In terms of e-commerce growth, P&G’s online sales grew 40% y-o-y in the first quarter of 2018. Overall, online sales represented more than 5% of the company’s total business in fiscal 2017.

In terms of the bottom line, Procter & Gamble continued to report solid earnings in the fiscal first quarter, and we expect this trend to extend into the fiscal second quarter as well. We also expect the company to witness slight pressure on its top line in Q2, due to rising competition from local players in the market and flattish growth in the consumer demand in the U.S.

We have created an interactive Dashboard for Procter & Gamble which outlines our forecasts for the company and our expectations for its Q2 earnings. You can modify our forecasts to see the impact any changes would have on the company’s earnings and valuation.

Consumer Demand Index

The Absolute Consumer Demand Index of America has been falling since September of 2016, and its effects have started to weigh on the results of consumer companies. However, the trailing 90-day consumer demand index in the U.S. remained mostly flat in this quarter. Going forward, the company will likely have to primarily rely on efficiency improvements, cost savings, and effective marketing strategies to boost earnings in the near term.

Future Outlook

For full year fiscal 2018, P&G expects its organic sales growth to be in the range of 2% to 3%, despite the continued deceleration of market growth rates. It also expects all-in sales growth of around 3% for the same period. In terms of the bottom line, the company expects its core earnings per share growth to be in the 5% to 7% range. In Q2, Reuters’ compiled analyst estimates forecast revenues of $17.4 billion and earnings of $1.14 per share, implying growth of about 3% and 6%, respectively.

Our $93 price estimate for Procter & Gamble’s stock is slightly ahead of the current market price.

See our complete analysis for Procter & Gamble

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