P&G's stock falls after a sales miss, as baby and health-care volumes declined

By Tomi Kilgore

Prices increased at the slowest rate in more than two years, while volume was flat - didn't fall - for the second straight quarter

Shares of Procter & Gamble Co. slipped Friday, after the consumer packaged-goods company reported fiscal third-quarter sales that came up short of forecasts, amid weakness in the segment encompassing baby, feminine and family-care products.

The sales miss, due in part to pricing-related volume declines in certain categories, offset profit that rose above expectations, enough to boost the full-year outlook.

The stock (PG) lost 0.9% in morning trading, to put it on track to snap a four-day win streak, and to suffer the first post-earnings decline in five quarters.

Net income for the quarter to March 31 rose to $3.75 billion, or $1.52 a share, from $3.40 billion, or $1.37 a share, in the same period a year ago. Excluding nonrecurring items, core earnings per share of $1.52 beat the FactSet of $1.42.

Net sales grew 0.6% to $20.20 billion, just below the FactSet consensus of $20.44 billion, as a price bump was partially offset by flat volume and unfavorable currency translation. That marked the second straight quarter P&G missed on sales, following a 14-quarter streak of beats.

The sales gain included flat volume, a 3% increase in price and a 2% negative impact from unfavorable currency moves.

The increase in price was at the lowest rate since the fiscal second quarter of 2022, and down from peak 10% increases during the second and third quarters of 2023.

And volume was flat for a second-straight quarter, which followed a six-quarter streak of declines.

The only business segment to see a sales decline was the baby, feminine and family-care division. That segment and health care were the only two that saw volume decline. (See below for more segment details.)

Gross margin improved three percentage points to 51.2%, as cost of sales fell 5.3%.

For fiscal 2024, the company raised its core EPS growth guidance to 10% to 11% from 8% to 9%, while the current FactSet EPS consensus of $6.46 implies 9.5% growth.

The growth outlook for sales was unchanged at 2% to 4%.

"From a stock standpoint, we view the result as mixed, with slowing sales likely reflecting weakening in underlying category growth, most notably in China," Stifel analyst Marck Astrachan wrote in a note to clients released before the conference call with analysts.

He reiterated his hold rating on the stock and his $157 stock price target.

P&G said it returned $3.3 billion of cash to shareholders during the quarter, including $2.3 billion via dividend payments and $1 billion through share repurchases.

Here's how P&G's business segments performed:

Fabric & home-care sales rose 2% to $7.17 billion, below the FactSet consensus of $7.27 billion, while volume increased 1% and prices grew 2%.Baby, feminine and family-care sales declined 2% to $4.34 billion, below the FactSet consensus of $5.15 billion, and volume fell 3% while prices increased 2%.Beauty sales increased 2% to $3.55 billion, below expectations of $3.67 billion; volume rose 1% and prices were up 4%.Health-care sales gained 2% to $2.87 billion, just shy of expectations of $2.89 billion, as volume dropped 4% while prices rose 4%.Grooming sales grew 3% to $1.54 billion, in line with expectations, with volume rising 2% and prices jumping 10%.

The stock has gained 6.4% year to date, while the Consumer Staples Select Sector SPDR ETF (XLP) has edged up 2.6% and the Dow Jones Industrial Average has tacked on 0.7%.

-Tomi Kilgore

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04-19-24 1119ET

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