Procter & Gamble (NYSE:PG) Misses Q3 Sales Targets
Consumer products behemoth Proctor & Gamble (NYSE:PG) missed Wall Street’s revenue expectations in Q3 CY2024, with sales flat year on year at $21.74 billion. Its non-GAAP profit of $1.93 per share was 1.7% above analysts’ consensus estimates.
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Procter & Gamble (PG) Q3 CY2024 Highlights:
- Revenue: $21.74 billion vs analyst estimates of $21.98 billion (1.1% miss)
- Operating profit: $5.80 billion vs analyst estimates of $5.87 billion (1.2% miss)
- EPS (non-GAAP): $1.93 vs analyst estimates of $1.90 (1.7% beat)
- Management reiterated its full-year EPS (non-GAAP) guidance of $6.98 at the midpoint
- Gross Margin (GAAP): 52.1%, in line with the same quarter last year
- Free Cash Flow Margin: 15.2%, down from 18.2% in the same quarter last year
- Organic Revenue rose 2% year on year (7% in the same quarter last year) (miss vs. expectations of 3%)
- Sales Volumes were flat year on year (-1% in the same quarter last year)
- Market Capitalization: $404.8 billion
“Our organic sales growth, earnings and cash results in the first quarter keep us on track to deliver within our guidance ranges on all key financial metrics for the fiscal year,” said Jon Moeller, Chairman of the Board, President and Chief Executive Officer.
Company Overview
Founded by candle maker William Procter and soap maker James Gamble, Proctor & Gamble (NYSE:PG) is a consumer products behemoth whose product portfolio spans everything from facial tissues to laundry detergent to feminine care to men’s grooming.
Household Products
Household products stocks are generally stable investments, as many of the industry's products are essential for a comfortable and functional living space. Recently, there's been a growing emphasis on eco-friendly and sustainable offerings, reflecting the evolving consumer preferences for environmentally conscious options. These trends can be double-edged swords that benefit companies who innovate quickly to take advantage of them and hurt companies that don't invest enough to meet consumers where they want to be with regards to trends.
Sales Growth
Reviewing a company’s long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years.
Procter & Gamble is one of the most widely recognized consumer staples companies. Its influence over consumers gives it negotiating leverage with distributors, enabling it to pick and choose where it sells its products (a luxury many don’t have). However, its scale is a double-edged sword because there are only so many big store chains to sell into, making it harder to find incremental growth.
As you can see below, Procter & Gamble’s sales grew at a sluggish 2.8% compounded annual growth rate over the last three years as consumers bought less of its products. We’ll explore what this means in the "Volume Growth" section.
This quarter, Procter & Gamble missed Wall Street’s estimates and reported a rather uninspiring 0.6% year-on-year revenue decline, generating $21.74 billion of revenue.
Looking ahead, sell-side analysts expect revenue to grow 3.5% over the next 12 months, similar to its three-year rate. This projection is underwhelming and indicates the market believes its newer products will not lead to better top-line performance yet. At least the company is tracking well in other measures of financial health.
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Volume Growth
Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.
To analyze whether Procter & Gamble generated its growth from changes in price or volume, we can compare its volume growth to its organic revenue growth, which excludes non-fundamental impacts on company financials like mergers and currency fluctuations.
Over the last two years, Procter & Gamble’s average quarterly sales volumes have shrunk by 1.4%. This decrease isn’t ideal as the quantity demanded for consumer staples products is typically stable. Luckily, Procter & Gamble was able to offset fewer customers purchasing its products by charging higher prices, enabling it to generate 4.7% average organic revenue growth. We hope the company can grow its volumes soon, however, as consistent price increases (on top of inflation) aren’t sustainable over the long term unless the business is really really special.
In Procter & Gamble’s Q3 2025, year on year sales volumes were flat. This result was a well-appreciated turnaround from the 1% year-on-year decline it posted 12 months ago, showing the company is heading in the right direction.
Key Takeaways from Procter & Gamble’s Q3 Results
Organic revenue missed, leading to a reported revenue miss. Operating profit also came in below. Offsetting these negatives was an EPS beat and a reaffirmation of previous EPS guidance for the full year. Overall, this was a mediocre quarter. The stock remained flat at $172.90 immediately after reporting.
Is Procter & Gamble an attractive investment opportunity right now?We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy.We cover that in our actionable full research report which you can read here, it’s free.
