Analyst Note| Erin Lash, CFA |
Leading up to wide-moat Procter & Gamble’s second-quarter earnings release the overarching question remained anchored in whether it would be able to continue the string of mid- to high-single-digit organic sales marks that have come to characterize the results over the past two and a half years. And in that regard, the firm did not disappoint, posting an 8% underlying sales gain (driven by 5% higher volumes and a 3% benefit from increased prices and favorable mix), a far cry from the low-single-digit levels the business was chalking up just a few short years ago. But we don’t surmise P&G’s top-line momentum is the product of a shift in focus away from driving profitability improvement. P&G also boasted gross and operating margin expansion, up 150 and 250 basis points, respectively, to 53.1% and 27.2%, reflecting the benefit of sales leverage and productivity gains that offset a 7% increase in advertising for its leading brands.