Procter & Gamble Shares Are Roughly Flat Since Earnings. Is the Stock a Buy?

Procter & Gamble released its fiscal first-quarter earnings report on Oct. 22. Here’s Morningstar’s take on Procter & Gamble’s earnings and stock.

Key Morningstar Metrics for Procter & Gamble

• Fair Value Estimate
  : $155.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : Low

What We Thought of Procter & Gamble’s Fiscal Q1 Earnings

Procter & Gamble reported 4.0% organic sales growth in the first quarter, driven by a 2.4% volume increase and a 1.6% aggregate benefit from higher prices and a favorable mix. However, cost savings couldn’t offset inflationary pressure, so adjusted gross margin fell 150 basis points to 49.8%.

Why it matters: Amid intense competition and geopolitical uncertainty, P&G is investing judiciously in its brands and capabilities. This is reflected in improved marks in its two largest markets: the United States (up 3%, versus down 1% in the fourth quarter) and China (8% growth, up from 4%).

• Innovation is giving P&G license to raise prices to partially offset unrelenting inflation. We expect management to continue aligning its products with evolving consumer trends.

The bottom line: We aren’t changing our $155 per share fair value estimate for wide-moat Procter & Gamble. Shares bounced more than 5% after earnings, making the stock a bit heated. However, if shares pull back on global macro and/or competitive concerns, we’d recommend investors add this competitively advantaged name to their shopping carts.

The following are excerpts from Morningstar’s company report on Procter & Gamble.

Fair Value Estimate for Procter & Gamble

With its 3-star rating, we believe Procter & Gamble’s stock is fairly valued compared with our long-term fair value estimate of $155 per share.

Although we expect competitive pressures to persist amid challenging global macroeconomic conditions, we believe P&G is well positioned to weather this uncertain landscape. For one, since the last economic downturn, the firm has prudently taken a more holistic approach to brand investing. Furthermore, management adjusted its mix about a decade ago to include more daily-use fare, pruning discretionary offerings, including its professional beauty brands.

Read more about Procter & Gamble’s fair value estimate.

Economic Moat Rating

We assign Procter & Gamble a wide economic moat based on its strong intangible assets, which have also enabled a cost advantage.

P&G operates as a leading household and personal care manufacturer, with around a 35% share of the global laundry care category, almost 60% of the domestic menstrual care space, around 20% of dishwashing worldwide, and more than one-fifth of the North American men’s grooming market, according to Euromonitor. Further, P&G has amassed significant scale, enabling lower unit costs than its smaller peers.

Read more about Procter & Gamble’s economic moat.

Financial Strength

P&G maintains solid financial health. The firm continues to generate significant cash, with free cash flow exceeding $15 billion in fiscal 2026 (about 18% of sales). We expect P&G to remain committed to returning excess cash to shareholders.

Read more about Procter & Gamble’s financial strength.

Risk and Uncertainty

We assign P&G a Low Uncertainty Rating. Across the sector, consternation has surrounded the competitive landscape and firms’ ability to offset inflation in raw materials, labor, packaging, and transportation with higher prices. From an environmental, social, and governance perspective, product recalls or allegations of price-fixing could also weigh on volume. More recently, tariffs and the conflict in the Middle East have caused considerable uncertainty. However, we don’t see any of these factors impairing the company’s brand standing or cash flows.

P&G has faced executional missteps in the past, which led to overextension as it sought to expand its category and geographic footprint. But we think it’s been charting a new course by reducing headcount and overhead, improving manufacturing efficiency, and freeing up funds to reinvest in its business.

Read more about Procter & Gamble’s risk and uncertainty.

PG Bulls Say

• P&G is again gaining share in China (which we estimate at a high-single-digit percentage of sales), with its 4% growth in the fourth quarter outpacing the market’s 2% decline. If share gains persist, sales could outpace our expectations.
• Opportunities to rationalize its product mix could enable P&G to more effectively direct brand spending to the highest-return aisles.
• Additional savings (which could stem from reduced overhead and higher returns on its manufacturing footprint and marketing investments) may materialize if efficiency is as ingrained in its culture as management suggests.

PG Bears Say

• North America remains in the doldrums (its largest market at around 50% of sales, down 1% in the fourth quarter); competitive and macro headwinds on its home turf could eventually dilute its brand standing.
• In fiscal 2027, P&G expects a $1 billion headwind from inflation (primarily from oil-based derivatives), which may dent profits if it can’t extract efficiencies and/or raise prices.
• Foreign-exchange volatility may hamper profits from time to time, as a portion of P&G’s products are sold in different geographic regions.

This article was compiled by Colin Laidley.