With a market capitalization of $341.02 billion, The Procter & Gamble Company (PG) offers a range of branded consumer packaged goods globally. Its segments encompass Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. These products are distributed in nearly 180 countries and territories.

PG is scheduled to release its fiscal 2024 first quarter financial results on October 18. Wall Street expects the company to report earnings of $1.72 per share for the quarter, indicating a 9.7% year-over-year improvement. Its revenue for the quarter is expected to increase 4.8% year-over-year to $21.59 billion.

In addition to an expected year-over-year improvement in earnings and revenues, I have evaluated what makes the investment case strong for PG in this article.

Before delving into PG’s financials, let's take a look at the recent developments that position the company well for growth.

On October 2, PG introduced a groundbreaking improvement to its Charmin brand's Ultra Soft category, replacing traditional perforation lines with scalloped edges. This customer-focused innovation could significantly enhance satisfaction, fostering increased brand loyalty and positively impacting PG's growth.

In addition, on August 29, Clearblue®, a renowned PG brand for home pregnancy and fertility tests, expanded into the menopause domain. Although menopause garners tenfold more searches than fertility, it currently occupies only 25% of the discussion space.

This offers a substantial, untapped opportunity for Clearblue to extend its market reach, boost sales, and contribute to PG's broader market growth. Shares of PG have gained 14.6% over the past year to close the last trading session at $144.69.

Here are the financial aspects of PG that could influence its performance in the near term:

Recent Financials Look Compelling

For the fiscal 2023 fourth quarter that ended June 30, 2023, PG’s net sales increased 5.3% year-over-year to $20.55 billion. Its gross profit grew 14.1% from the year-ago value to $9.94 billion. Also, its operating income rose 15.7% from the prior year’s quarter to $4.16 billion.

In addition, net earnings attributable to PG increased 10.9% year-over-year to $3.38 billion, while net earnings per common share stood at $1.37, a 13.2% year-over-year rise. Moreover, as of June 30, 2023, the company’s cash and cash equivalents amounted to $8.25 billion, compared to $7.21 billion as of June 30, 2022.

Impressive Historical Growth

Over the past three years, PG’s revenue and EBITDA increased at a CAGR of 5% and 4.4%, respectively. Its net income and EPS grew at respective CAGRs of 4% and 5.9%. In addition, the company’s levered free cash flow rose at a CAGR of 2.3% during the same period.

Upbeat Analyst Estimates

The consensus revenue estimate of $85 billion for the fiscal year ending June 2024 reflects a 3.7% year-over-year improvement. Likewise, the consensus EPS estimate of $6.39 for the current year exhibits an 8.3% rise from the previous year. Moreover, the company topped the consensus revenue estimates in all four trailing quarters, which is impressive.

In addition, analysts expect the company’s revenue and EPS for the next fiscal year (ending June 2025) to grow 3.8% and 7.7% from the previous year to $88.20 billion and $6.88, respectively.

Dividend Growth

PG has raised its dividends for 66 consecutive years. It pays a $3.76 per share dividend annually, which translates to a 2.60% yield on the current price level. Its dividend has grown at a 6.5% CAGR over the past three years, and its four-year average dividend yield is 2.42%.

Higher-Than-Industry Profitability

PG’s trailing-12-month gross profit margin of 48.05% is 43.6% higher than the industry average of 33.46%. Also, the stock’s trailing-12-month EBITDA margin of 26.55% compares with the 11.47% industry average. Furthermore, its trailing-12-month net income margin of 17.87% is 311.6% higher than the industry average of 4.34%.

POWR Ratings Show Promise

PG’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. PG has an A grade for Stability, consistent with its 24-month beta of 0.61. In addition, the stock has a B grade for Quality, justified by its high profitability.

PG is ranked #19 in the 53-stock Consumer Goods industry. Click here to access PG’s Growth, Value, Momentum, and Sentiment ratings.

Bottom Line

PG's recent innovations represent a strategic move to fuel the company’s overall growth. These advancements cater to evolving customer needs, expanding market reach, enhancing brand loyalty, and boosting sales. The combined efforts are expected to position PG for sustained and diversified financial growth in the future.

Coupled with strong financials, robust profitability, and high stability, PG could be an ideal buy ahead of its anticipated first-quarter earnings release, poised to demonstrate improvement.

How Does The Procter & Gamble Company (PG) Stack Up Against Its Peers?

While PG has an overall grade of B, equating to a Buy rating, you may also check out these other A-rated stocks within the Consumer Goods industry: Henkel AG & Co. KGaA (HENKY), Kimberly-Clark de México, S. A. B. de C. V. (KCDMY) and Acme United Corporation (ACU). For exploring more A-rated Consumer Goods stocks, click here.

What To Do Next?

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PG shares were trading at $146.85 per share on Monday afternoon, up $2.16 (+1.49%). Year-to-date, PG has declined -1.27%, versus a 15.40% rise in the benchmark S&P 500 index during the same period.

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.

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