Factors likely to impact Procter & Gamble Q2 Earnings
The Procter & Gamble Company PG will announce its fiscal second-quarter 2023 results Jan 19, prior to the opening bell. In the yet to be reported quarter, the company will report sales and earnings declines.
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. In the past 30 days, this consensus mark has not changed. 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.
The earnings surprise for the last quarter was 1.3%. In the four preceding quarters, it has averaged a top-line beat in excess of 1.05%.
Procter & Gamble Company The Price and EPS Surprise
Procter & Gamble Company The price-eps-surprise | Procter & Gamble Company The Quote
Important Factors to Consider
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. The currency movements in the quarter to be reported are likely to have had a negative impact on all-in sales growth as well as earnings per share.
On the last reported quarter’s earnings call, Procter & Gamble predicted higher commodity and freight costs to persist throughout fiscal 2023. Our estimates show a 4.7% decline in gross profits year-over–year, with the gross margin shrinking by 30 bps. We expect a 6.1% decrease in operating income for the fiscal second-quarter, with the operating profit contracting 50 basis points. This could translate into a decrease in bottom-line revenue in the yet to be reported quarter.
Currency headwinds are likely to have hurt the company’s performance in the to-be-reported quarter. Expect rising input costs to have had an impact on fiscal second-quarter performance. We estimate that currency headwinds will have a 6.6% impact on fiscal second-quarter performance.
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. The Zacks Consensus Estimate of organic sales growth is 4.9%.
The company has focused on productivity and cost-saving strategies, which has helped its margins. PG has witnessed cost savings and efficiency gains across all facets its business. This is due to the productivity program. The productivity program’s efforts to balance top and bottom line growth are reflected in PG’s business investments and efforts against macro cost headwinds. In the fiscal second quarter, margins and bottom lines were helped by productivity savings and pricing.
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. A positive Earnings Score ESP combined with a Zacks rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) will increase the odds of an earnings beat. This is not the case. 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 a Favorable Combination
These are some companies that you might want to look at. Our model shows that they have the right combination to produce an earnings beat.
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Procter & Gamble Company The (PG) : Free Stock Analysis Report
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