Procter & Gamble’s (PG) Mixed Q4: Diluted EPS Falls Short at $1.27
Procter & Gamble's Q4 performance showcased a mixed bag, with diluted EPS falling short of expectations at $1.27.
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The Procter & Gamble Company (NYSE: PG) reported its fourth quarter and fiscal year 2024 results, showcasing a mixed performance. Net sales for the fourth quarter remained flat at $20.5 billion, unchanged from the prior year. However, organic sales, which exclude the impacts of foreign exchange and acquisitions and divestitures, increased by 2%.
This growth was primarily driven by a 1% increase in all-in volume and a 1% increase due to higher pricing, offset by a 2% unfavorable foreign exchange impact. Diluted net earnings per share (EPS) for the fourth quarter were $1.27, a 7% decline compared to the previous year.
The decrease was primarily attributed to higher restructuring charges related to the substantial liquidation of operations in certain Enterprise Markets, including Nigeria. On a positive note, core net earnings per share, which exclude non-recurring items, rose by 2% to $1.40.
Currency-neutral core EPS saw a more substantial increase of 6% versus the prior year.P&G’s various segments showed varied performance.
The Beauty segment saw a 3% increase in organic sales, driven by higher pricing and favorable product mix. Grooming’s organic sales increased by 7%, primarily due to pricing gains in Latin America and volume growth from innovation.
Health Care and Fabric & Home Care segments also posted organic sales growth of 4% and 2%, respectively. However, the Baby, Feminine, and Family Care segment saw a 1% decline in organic sales.
Procter & Gamble Report Mixed Fourth-Quarter Performance
Procter & Gamble’s fourth-quarter performance was mixed compared to market expectations. The company reported a diluted EPS of $1.27, falling short of the expected $1.37, marking a 7% decline from the previous year. However, the core EPS of $1.40 slightly exceeded the expectation of $1.37, reflecting a 2% increase.
This discrepancy highlights the impact of non-recurring items such as restructuring charges on the company’s profitability. In terms of revenue, P&G reported net sales of $20.5 billion for the fourth quarter, slightly below the market expectation of $20.73 billion. The flat performance in net sales was primarily due to unfavorable foreign exchange impacts, offsetting gains from increased volume and pricing.
Organic sales growth of 2% was in line with the company’s internal targets but did not meet the higher market expectations. The fiscal year 2024 results also showed a similar trend. P&G’s net sales for the year were $84.0 billion, a 2% increase from the previous year, but the growth was modest compared to the 4% increase in organic sales. Diluted EPS for the fiscal year was $6.02, a 2% increase, while core EPS saw a robust 12% growth to $6.59.
The company’s strong cash flow generation and shareholder returns, including $9.3 billion in dividend payments and $5 billion in share repurchases, were highlights of the fiscal year.
PG Expects Organic Sales Growth in Range of 3% to 5% for Fiscal Year 2025
Procter & Gamble has provided guidance for fiscal year 2025, expecting all-in sales growth of 2% to 4% versus the prior year. The company anticipates a headwind of approximately 1% from foreign exchange impacts, but it expects organic sales growth of 3% to 5%.
This outlook reflects P&G’s confidence in its ability to drive growth through pricing and innovation, despite external challenges. P&G projects fiscal 2025 diluted net earnings per share growth in the range of 10% to 12% compared to fiscal 2024 GAAP EPS of $6.02. Core EPS growth is expected to be between 5% and 7%, equating to a range of $6.91 to $7.05 per share.
The midpoint estimate of $6.98 represents a 6% increase from the previous year. The company also anticipates a net headwind of around $500 million after-tax from unfavorable commodity costs and foreign exchange, equating to a $0.20 per share drag on core EPS growth.
P&G expects a core effective tax rate of 20% to 21% for fiscal 2025. Capital spending is projected to be in the range of 4% to 5% of net sales. The company also plans to maintain strong shareholder returns, with an expected $10 billion in dividend payments and $6 to $7 billion in share repurchases for the fiscal year.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
Tim Fries
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
