Factors Likely to Affect Procter & Gamble's (PG) Q2 Earnings
The Procter & Gamble Company PG is set to report second-quarter fiscal 2023 results on Jan 19, before the opening bell. The company is expected to deliver sales and earnings declines in the to-be-reported quarter.
The Zacks Consensus Estimate for the company’s fiscal second-quarter earnings is pegged at $1.57 per share, indicating a 5.4% decline from the year-ago quarter’s reported figure. The consensus mark has been unchanged in the past 30 days. For fiscal second-quarter revenues, the consensus mark is pegged at $20.57 billion, suggesting a 1.8% decline from the prior-year quarter’s reported figure.
We expect the company’s fiscal second-quarter total revenues to decline 4.6% year over year to $20,065.3 million and the bottom line to dip 5.4% to $1.57 per share.
In the last reported quarter, the company delivered an earnings surprise of 1.3%. It has delivered a bottom-line beat of 1.05%, on average, in the trailing four quarters.
Procter & Gamble Company The Price and EPS Surprise
Procter & Gamble Company The price-eps-surprise | Procter & Gamble Company The Quote
Key Factors to Note
Procter & Gamble has been witnessing higher freight, and commodity and input material cost inflation, which have been affecting its performance. The company’s gross margin for the fiscal second quarter is likely to have been under pressure, driven by the continued impacts of commodity and input material cost inflation, higher freight costs, negative product mix and other impacts, and increased product and packaging investments. Currency movements are expected to have negatively impacted all-in sales growth and earnings per share in the to-be-reported quarter.
On the last reported quarter’s earnings call, Procter & Gamble predicted higher commodity and freight costs to persist throughout fiscal 2023. Our estimate indicates a 4.7% year-over-year decline in gross profit for the fiscal second quarter, with the gross margin contracting 30 bps. We estimate a 6.1% decline in operating income in the fiscal second quarter, with the operating margin contracting 50 bps. This is likely to translate into a bottom-line decline in the to-be-reported quarter.
Currency headwinds are likely to have hurt the company’s performance in the to-be-reported quarter. Rising input costs are expected to have weighed on the fiscal second-quarter performance. Our estimate indicates a 6% impact from currency headwinds in the fiscal second quarter.
However, Procter & Gamble has been gaining from improved productivity and persistent demand for cleaning products. The company’s second-quarter fiscal 2023 results are expected to reflect the benefits of continued strength in brands and appropriate strategies, which have been aiding organic sales growth. Notably, the Zacks Consensus Estimate for organic sales growth is pegged at 4.9%.
The company has been focused on productivity and cost-saving plans, which have been aiding its margins. PG has been witnessing cost savings and efficiency improvements across all facets of its business, driven by the productivity program. Its continued business investments and efforts to offset macro cost headwinds, and balanced top and bottom-line growth underscore its productivity efforts. Gains from productivity savings and pricing are expected to have aided margins and the bottom line in the fiscal second quarter.
Moreover, the company is likely to have witnessed SG&A expense leverage, owing to savings from overhead and marketing expenses, and cost leverage gains due to higher sales and real estate.
Zacks Model
Our proven model does not conclusively predict an earnings beat for Procter & Gamble this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, this is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Procter & Gamble has a Zacks Rank #2 and an Earnings ESP of -0.21%.
Stocks With Favorable Combination
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to deliver an earnings beat.
e.l.f. Beauty ELF has an Earnings ESP of +31.48% and currently sports a Zacks Rank #1. The company is expected to register top-line growth when it reports the third-quarter fiscal 2023 numbers. The Zacks Consensus Estimate for ELF’s quarterly revenues is pegged at $121.5 million, which suggests growth of 23.8% from the prior-year quarter’s reported figure.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for e.l.f. Beauty’s quarterly earnings has been unchanged in the past 30 days at 23 cents per share, suggesting a 4.2% decline from the year-ago reported number. ELF has delivered an earnings beat of 92.8%, on average, in the trailing four quarters.
Archer Daniels Midland ADM currently has an Earnings ESP of +3.28% and a Zacks Rank #2. ADM is anticipated to register top and bottom-line growth when it reports the fourth-quarter 2022 results. The Zacks Consensus Estimate for Archer Daniels’ quarterly revenues is pegged at $26.6 billion, indicating an improvement of 15.1% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for Archer Daniels’ bottom line has moved up 1.3% in the past 30 days to $1.57 per share. The consensus estimate suggests growth of 4.7% from the prior-year quarter’s reported figure. ADM has delivered an earnings beat of 26.2%, on average, in the trailing four quarters.
Colgate-Palmolive CL has an Earnings ESP of +3.44% and a Zacks Rank #3 at present. CL is likely to register top-line growth when it reports the fourth-quarter 2022 numbers. The Zacks Consensus Estimate for its quarterly revenues is pegged at $4.54 billion, which suggests growth of 3.2% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for Colgate’s quarterly earnings has been unchanged in the past 30 days at 76 cents per share, suggesting a decline of 3.8% from the year-ago quarter’s reported number. CL has delivered a negative earnings surprise of 0.4%, on average, in the trailing four quarters.
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Procter & Gamble Company The (PG) : Free Stock Analysis Report
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