PG Q2 2022 Earnings Commentary

On January 19, 2021 Procter & Gamble reported 2nd quarter 2022 earnings results (see press release here).

For the quarter, the company reported 6% top line revenue growth to $20.9 Billion versus last year. Diluted earnings per share (EPS) in Q2 was $1.66 vs. a $1.65 consensus estimate and up from $1.64 a year ago (based on ‘core’ reported eps).

Even as revenues grew, gross profits fell 2% due to increased cost pressures.  Gross profit margins declined a full 4% to 49.1% from 53.1% a year earlier.

P&G’s Health Care segment continued to lead with net sales up 8%, driven by a combination of volume growth, price increases, and a mix shift.

Despite solid volume and pricing growth in the company’s flagship Fabric & Home Care segment, net earnings fell 9% versus the year ago quarter. The Baby, Feminine & Family Care segment saw a double-digit net earnings decline of 12%.

For the full fiscal year, the company expects a $2.8 billion ($1.10 per share) after-tax headwind due to inflated costs. Thanks to prescient price increases last September, overall net pricing increased 3% in Q2 and helped somewhat offset higher costs. Looking at other costs, SG&A spending remained relatively level.

P&G revised its fiscal 2022 “all-in” sales growth forecast from a range of 2% to 4% to a higher low-end range of 3% to 4%.

The company expects 2022 bottom line ‘core’ EPS to grow between 3%-6% vs. 2021’s core $5.66 per share.

These estimates would put P&G’s full year ‘core’ earnings per share in a range of $5.83 to $5.99 for fiscal 2022. Applying this guidance to P&G’s January 19th, 2022 closing price ($162.00) places their forward price/earnings valuations between 27.0 and 27.8 times earnings.

P&G beat consensus earnings forecasts for the last three consecutive quarters, their guidance remains strong, and expectations remain high. Still, P&G’s price-earnings valuation continues to trend near the high-end of its range over the past decade (14.6x in 2011 and 25.7x in 2019).

 

 

This material is provided by Schmitt Wealth Advisers for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Opinions expressed by Schmitt Wealth Advisers are based on economic or market conditions at the time this material was written. Economies and markets fluctuate. Actual economic or market events may turn out differently than anticipated. Facts presented have been obtained from sources believed to be reliable. Schmitt Wealth Advisers, however, cannot guarantee the accuracy or completeness of such information. Past performance may not be indicative of future results.

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