P&G shares fall despite good sales as Wall Street sets high bar
Procter & Gamble’s organic sales rose 5% and it has raised its profit outlook on expected higher growth for the full year
New York — Procter & Gamble (P&G) fell 3.5% on Thursday as investors focused on a revenue miss instead of an optimistic forecast, a sign that Wall Street is setting a high bar for quarterly earnings with stocks at record highs.
Organic sales, which exclude items such as acquisitions and currency fluctuations, rose 5% in the company’s fiscal second quarter, short of the average of analysts’ projections for growth of 5.6%, according to estimates compiled by Bloomberg.
Meanwhile, the company sees the measure rising 4% to 5% for the full year, compared with the previous range of 3% to 5%. P&G also raised its profit outlook.
After P&G shares rose 36% during a strong 2019, US investors may be expecting nearly flawless results. That’s emerging as a recurring theme this earnings season: P&G joins companies including Netflix and healthcare giant Johnson & Johnson in seeing shares fall after posting mixed results.
Analysts from Stifel and Jefferies both predicted that P&G’s stock would fall on Thursday after the results given the recent gains.
P&G is also running up on concerns that economic activity is slowing. While the company posted broad strength in most of its businesses, including beauty, healthcare and grooming, it continues to raise prices. That strategy could backfire if US consumers pull back.
There’s already been some evidence that’s starting to happen. Target slashed its quarterly sales outlook after it missed its own expectations in the holiday season.
Data tracker NPD Group, meanwhile, said that retailers didn’t have “their typical robust peak season”.
Baby, feminine and family care, in particular, fell short of expectations, with organic sales rising just 1%. That’s the weakest growth among the company’s business units. On a call with analysts, CFO Jon Moeller said delivering growth in the segment could “take some time”.
The company posted broad gains in other categories, however; a sign that 2019’s strength is holding and the stagnation of previous years has faded away. Steps to boost growth while limiting costs appear to be broadly paying off.
P&G’s beauty business, which includes Head & Shoulders shampoo and Olay skincare products, once again outperformed other segments, with organic sales growth of 8%, matching estimates compiled by Bloomberg.
The grooming business, which is largely driven by the Gillette brand, posted growth of 4%, slightly outpacing expectations.
P&G shares fell as much as 3.5% in pre-market trading Thursday before paring some of the decline.