Shares of Procter & Gamble rose Friday after the consumer goods company beat earnings and revenue expectations following more price increases.
Procter & Gamble (ticker: PG) reported fiscal fourth quarter earnings of $1.37 per share on $20.6 billion in revenue. Analysts polled by FactSet had expected laundry detergent maker Tide to post earnings of $1.32 per share on revenue of $20 billion.
Concerns about a weakening consumer remain top of mind for investors. Stubbornly high inflation and rising interest rates have hit the wallets of many shoppers, leaving them looking for bargains.
Procter & Gamble said it increased prices by 7% during the quarter, following a 10% increase in the third quarter. The price increases led to declines in sales volumes in all divisions during the quarter, mainly due to declines in healthcare and textiles and home care.
But Procter & Gamble has a wide range of products – and Raymond James analyst Olivia Tong believes this will benefit the company at a time when customers may want to trade-in.
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“We think PG will continue to be under the most pressure in its categories with greater exposure to private labels such as tissues/towels, but given the breadth of price points in PG’s portfolio today relative to past downturns, we expect that the company will pull back trade from its own brands, just as the Gain brand is currently doing for Tide,” Tong wrote in a research note earlier this week before earnings release. She rates Procter & Gamble on Outperform with a price target of $175.
There are also bright spots in the data that could be a good sign for the progress of consumer goods stocks. The US economy grew at an annualized rate of 2.4% in the second quarter, which was more than economists had expected and was partly driven by consumer spending.
However, personal consumption expenditure increased by 1.6% in the period, down from earnings of 4.2% in the first quarter. Consumers spent more on services than on goods in the quarter.
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For fiscal 2024, Procter & Gamble said it expects revenue growth of between 3% and 4% from $82 billion in 2023. The company also expects fiscal year earnings of between $6.25 and $6.43 per share, up from earnings of $5.90 for FY 2023.
“As we look forward to fiscal 2024, we expect to deliver strong organic revenue growth, earnings per share growth and free cash flow productivity – each in line with our long-term growth algorithm, despite ongoing macroeconomic and geopolitical challenges, Chief Executive Jon Moeller said in the earnings release.
Shares of Procter & Gamble rose 1.6% in premarket trading on Friday to $154.53. At the start of the session, the stock is up 0.4% this year.
Write to Angela Palumbo at angela.palumbo@dowjones.com
(TagsToTranslate)Cosmetics/Toiletries
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