Title: P&G's Share Price Soaring Post Q2: What's Next on the Horizon?
Title: P&G's Share Price Soaring Post Q2: What's Next on the Horizon?
Procter & Gamble (NYSE: PG) recently reported its Q2 fiscal 2025 results, exceeding street estimates. The corporation reported revenue of $21.9 billion and adjusted earnings of $1.88 per share, surpassing consensus estimations of $21.5 billion and $1.86, respectively. The company's robust performance was fueled by a surge in household staples sales. PG stock experienced a 5% gain within a week, prompted by its outstanding results.
PG stock has climbed 15% since the start of 2024, although it has underperformed the S&P500 index, which has risen by 28%. One of the causes of PG's stock's recent underperformance has been sluggish sales in China. However, if you seek returns with a smoother ride than an individual stock, consider checking out the High-Quality Portfolio. This investment strategy has outperformed the S&P and yielded impressive returns of over 91% since its inception.
Procter & Gamble's revenues of $21.9 billion represented a 2% year-over-year increase. Although pricing remained flat, volume grew by 1%, while the product mix also contributed 1% to the total revenue. Breaking down the segments, Beauty sales remained stagnant, with a minor decline in sales for skin care products due to lower volume. Hair care sales declined in the mid-single-digits, while personal care sales saw a surge in double-digits. Grooming sales increased by 1%, and Health Care revenue rose by 2%, primarily due to a favorable product mix. Fabric & Home Care sales also grew by 2% due to volume gains, while Baby, Feminine & Family Care sales climbed by 3% due to strong sales in the family care sector.
PG reported an 80 basis point contraction in its core operating margin to 26.2% in Q2. Despite the margin contraction, PG posted a 2% year-over-year growth in adjusted earnings per share to $1.88. The margin contraction was offset by the positive impact of higher revenue and a decrease in shares outstanding. Looking forward, PG has reaffirmed its organic sales growth outlook of 3% to 5% in 2025, and it expects earnings per share to fall between $6.91 and $7.05.
The Impact on PG Stock
Over the last week, PG stock has seen a 5% boost, but its performance over the past few years has been inconsistent, even though its annual returns were less volatile than the S&P 500. Between 2021 and 2024, PG stock boasted returns of 21%, 5%, -1%, and 17%, respectively.
Compared to PG stock, the High-Quality Portfolio – composed of 30 high-performing stocks – has been less volatile and has outperformed the S&P 500 over the last four years. The success of this portfolio is largely due to its multi-factor approach, which incorporates factors like quality, momentum, value, and diversification, resulting in better returns with less risk.
In the current uncertain economic climate, there are reservations about whether PG will outperform the S&P 500 in the next 12 months or face challenges like it did in 2021, 2023, and 2024. Trefis estimates PG's valuation to be around $175 per share, close to its current market price, based on a 25x P/E multiple and expected earnings of $6.94 on a per share basis for the full fiscal 2025.
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Despite Procter & Gamble (PG) surpassing revenue and earnings estimates in Q2 fiscal 2025, its stock valuation, as estimated by Trefis, remains close to $175 per share, based on a 25x P&G's expected earnings of $6.94 per share for the full fiscal 2025.
The robust performance of P&G in Q2 fiscal 2025, leading to a 5% stock gain, has contributed to PG's total revenue of $21.9 billion, marking a 2% year-over-year increase.