P&G beats estimates, stock jumps as volume growth returns after a year

Procter & Gamble exceeded analyst expectations for quarterly earnings and revenue, reporting its first volume growth in a year and sending the company's shares up approximately 3.3% on Friday.

For its fiscal third quarter, P&G reported net income attributable to the company of $3.93 billion, or $1.63 per share, an increase from $3.78 billion, or $1.54 per share, in the same period last year. 

Excluding restructuring costs and other specific items, the company's earnings were $1.59 per share.

P&G reported a 7% increase in net sales, reaching $21.24 billion. Stripping out the impact of acquisitions, divestitures, and currency fluctuations, organic sales grew by 3%.

First volume growth in a year signals consumer shift

“Geopolitical dynamics have thrown new challenges in front of us, but we will continue to fully support the business to maintain the momentum we’re creating,” Shailesh Jejurikar, President and Chief Executive Officer at P&G, said in a statement on Friday. 

Significantly, the company's volume increased by 2%. This marks the first time in a year that P&G has seen company-wide volume growth. Volume is a more accurate gauge of product demand than sales, as it excludes pricing changes. 

The volume increase suggests a shift, as P&G, like many consumer goods companies, had previously experienced shrinking demand. This prior trend was attributed to shoppers attempting to reduce spending by making their household staples, such as laundry detergent and shampoo, last longer.

"I would say, right now, the consumer in the US is stable," P&G CFO Andre Schulten said on a media call. "We see the bifurcation of the consumer segments continuing."

Beauty and baby drive growth while grooming lags

The standout performer for P&G this quarter was its beauty division, achieving a 5% volume increase.

This growth was driven by volume gains across its key categories of personal care, skin care, and hair care, which include major brands like Olay, Head & Shoulders, and Pantene.

Demand for the company's diapers and family care products, such as Bounty paper towels and Charmin toilet paper, led to a 3% volume increase in the baby, feminine, and family care segment.

Additionally, demand increased for products in the baby, feminine, and family care segment, leading to a 3% volume increase.

This growth was driven by higher sales of the company's diapers and family care items, such as Charmin toilet paper and Bounty paper towels.

The company's two underperforming segments were grooming and health care. Both reported a 2% decline in volume.

The grooming segment includes products like Gillette and Venus, while the health care segment features brands such as Oral-B and Vicks.

The company's full-year forecast remains unchanged, anticipating sales growth between 1% and 5% and net earnings per share growth in the 1% to 6% range.

“We’re increasing investments to accelerate momentum with consumers despite the challenging geopolitical and economic environment, while still maintaining our guidance ranges for the fiscal year,” Jejurikar said. 

Schulten stated that P&G anticipates a $150 million impact in the fiscal fourth quarter due to higher costs.

This increase is primarily attributed to rising transportation expenses, which are driven by elevated fuel prices.