P&G Q3 2024: Earnings exceed expectations, full-year forecast raised

On the evening of April 19, 2024, Beijing time, the international fast-moving consumer goods giant Procter & Gamble (P&G) released its financial report for the third quarter of fiscal year 2024.

The company reported a net profit attributable to common shareholders of $3.685 billion for the third quarter of fiscal year 2024, a year-on-year increase of 10.73%; revenue was $20.195 billion, up 0.63% year-on-year.

According to the company's announcement, core earnings per share for the third quarter of fiscal year 2024 were $1.52, exceeding Wall Street's expectation of $1.42. However, net sales fell short of analysts' estimates of $20.44 billion.

The company stated: "Despite multiple headwinds, we delivered solid sales and strong earnings growth in the third quarter, enabling us to raise our EPS growth guidance and maintain our revenue outlook for the fiscal year."

Additionally, it is worth noting that the company raised its fiscal year 2024 core net EPS growth guidance to a range of 10% to 11%, up from the previous forecast of 8% to 9%. Compared to last year, the company maintained its total sales growth expectation at 2% to 4%.

The company's cost-cutting and efficiency improvements in the first quarter of fiscal year 2024 also yielded significant results. During the reporting period, P&G's gross margin rose by three percentage points year-on-year to 51.2%, also exceeding Wall Street's expectations.

P&G attributed the cost reduction partly to reduced overtime in production lines and a shift to lower-cost raw materials.

However, the potential for further cost reductions in manufacturing expenses is relatively limited. What P&G needs more is to expand its market and sales volume to drive profit growth through scale.

Overall, the company's sales volume in the third quarter of fiscal year 2024 remained flat, but thanks to a 3% price increase, total sales grew by 1%.

P&G's largest market, North America, saw a 3% sales volume growth in the third quarter, slightly lower than the previous quarter's 4%, but it remained the backbone of the company's growth.

Despite persistent high inflation dampening purchasing power, consumers continue to increase spending on essential goods. P&G is preparing to raise prices for the sixth consecutive year, with prices in the most recent quarter 3% higher than the same period last year.

While higher prices support stronger profitability, this comes at the cost of slower sales volume growth.

In recent quarters, the U.S. CPI has remained around 3%, but the Federal Reserve has maintained a cautious stance on monetary policy. In recent days, Fed officials have even hinted at the possibility of further rate hikes. The regulators' hesitation on interest rates could lead to further increases in demand for basic consumer goods, even as prices continue to rise.

During the reporting period, sales in P&G's beauty division (including Gillette razors) grew by 2%, exceeding expectations, with organic sales growth of 3%, driven by price increases in Europe and Latin America.

Overall, as the global economy gradually recovers from the impact of the pandemic, consumption of essential goods will continue to grow slowly, but sales of premium products like cosmetics may not be as strong. For example, SK-II saw a significant decline in sales in Greater China.

This decline may be partly due to the impact of Japan's nuclear wastewater incident, but it could also be related to China's overall economic and employment conditions in 2023.

Therefore, P&G's ability to maintain stable growth as the economy gradually emerges from difficulties is commendable.$Procter & Gamble(PG.US)