Procter & Gamble Stock: A Buy Opportunity Before Q2 Earnings?

The Procter & Gamble Company PG, also known as P&G, is set to report second-quarter fiscal 2025 results on Jan. 22, before the opening bell. The company is expected to have witnessed year-over-year sales and earnings growth in the to-be-reported quarter.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.The Zacks Consensus Estimate for fiscal second-quarter revenues is pegged at $21.7 billion, suggesting a 1.1% rise from the prior-year quarter’s reported figure. The consensus mark for PG’s fiscal second-quarter earnings is pegged at $1.87 per share, indicating 1.6% growth from the year-ago quarter’s actual. The consensus mark has moved down by a penny in the past 30 days.The Cincinnati, OH-based company has consistently delivered steady earnings, evidenced by its bottom-line beat trend over the past nine quarters. PG has a trailing four-quarter earnings surprise of 4.8%, on average, including a 1.6% surprise in the most recent quarter. With this record, the question is whether PG can sustain this momentum.PG’s Earnings WhispersOur proven model does not conclusively predict an earnings beat for Procter & Gamble this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.Procter & Gamble has a Zacks Rank #3 and an Earnings ESP of -1.42%. You can see the complete list of today’s Zacks #1 Rank stocks here.Key Trends to Watch Ahead of PG's Q2 EarningsProcter & Gamble has been demonstrating its dominance in the global market by leveraging its brand strength to drive organic sales growth. As a manufacturer of products catering to the daily needs of consumers worldwide, P&G's success in the preceding quarters can be attributed to its robust brand portfolio and effective business strategies. The persistence of these trends is expected to benefit the company’s organic sales for the fiscal second quarter.PG’s organic sales for the fiscal second quarter are anticipated to have benefited from strong pricing strategies, a favorable product mix and robust segmental performances.Our model predicts year-over-year organic sales growth of 2% for P&G in the second quarter of fiscal 2025. Fiscal second-quarter organic sales are expected to rise 5% each for the Grooming and Health Care segments, and 3% for Fabric & Home Care segment, offset by a 1% decline for the Beauty segment. Organic sales for the Baby, Feminine & Family Care segment is expected to be flat year over year in the fiscal second quarter.P&G has been pursuing cost-saving and productivity measures to drive margins and reinforce its competitive advantage. The company's commitment to enhancing productivity while mitigating macro cost headwinds has been integral in maintaining balanced top and bottom-line growth. Its focus on productivity and cost-saving plans are likely to have boosted margins in the to-be-reported quarter.We expect PG's core gross margin for the fiscal second quarter to have been influenced by significant productivity savings. Our model predicts a year-over-year core gross margin expansion of 10 bps for the to-be-reported quarter.Procter & Gamble Company (The) Price and EPS Surprise  Procter & Gamble Company (The) price-eps-surprise | Procter & Gamble Company (The) Quote However, Procter & Gamble has been facing headwinds related to the market issues in Greater China, geopolitical tensions and financial impacts from currency volatility. Amid all regions, the company’s headwinds in Greater China, relating to reduced consumer spending amid a tough macroeconomic environment, stand out.PG is experiencing significant difficulties in Greater China, its second-largest market, due to tough macroeconomic conditions, resulting in reduced consumer spending. The company has been witnessing brand-specific issues for its flagship beauty brand, SK-II, influenced by its Japanese heritage. While the company expects general market trends and SK-II dynamics to improve over time, it does not foresee a return to growth in the region or for the SK-II brand for at least another quarter or two. Consequently, the company’s fiscal second-quarter sales are expected to reflect the impacts of the ongoing headwinds in China.Also, volume trends have continued to be soft in some enterprise markets in Europe and the Asia Pacific, Middle East, and Africa countries, including Egypt, Saudi Arabia, Turkey, Indonesia, Malaysia and Russia. These regions have been particularly impacted by geopolitical tensions, which have reduced consumer spending and slowed retail activities. Moreover, the company has been witnessing continued boycotts of Western brands in the Middle East.On the last reported quarter’s earnings call, the company expected the global environment to remain volatile and challenging throughout fiscal 2025, relating to input costs, currencies, consumers, competitors, retailers and geopolitical dynamics. These are anticipated to have affected its performance in the fiscal second quarter. Our model estimates a 0.4% impact of currency headwinds for the fiscal second quarter.Higher supply-chain costs, rising inflation and elevated transportation expenses have been leading to increased SG&A expenses for PG. We estimate core SG&A expenses to grow 0.1% year over year for the fiscal second quarter. As a percentage of sales, core SG&A expenses are expected to decline 30 bps for the fiscal second quarter.Price Performance & ValuationPG shares have exhibited a downtrend in the past six months, recording a decline of 5.7%. The leading consumer goods company’s shares have outperformed the industry and the Zacks Consumer Staples sector’s declines of 5.8% and 7.9%, respectively. Meanwhile, the stock has underperformed the S&P 500’s 5% rise.PG's 6-Month Stock Performance Image Source: Zacks Investment Research The Procter & Gamble stock has underperformed Clorox’s CLX rally of 15.4% and Church & Dwight’s CHD decline of 0.3% in the past six months. However, PG has outperformed Colgate-Palmolive’s CL decline of 11.6% in the same period.At the current price of $159.65, Procter & Gamble trades close to its 52-week low of $146.28. This represents a 9.1% premium to the 52-week low mark.From the valuation standpoint, PG trades at a forward 12-month P/E multiple of 22.25X, exceeding the industry average of 20.98X and the S&P 500’s average of 21.81X. Procter & Gamble’s valuation appears quite pricey.Given the premium valuation, investors could face significant risks if the company's future performance does not meet expectations. The consumer goods market is becoming increasingly competitive, and Procter & Gamble’s innovation and market expansion may not suffice to drive significant growth. Macroeconomic challenges and heightened competition could impede the company's ability to sustain its current growth trajectory. Image Source: Zacks Investment Research Investment ThesisProcter & Gamble is a leader in the consumer goods industry, with a diverse portfolio of iconic brands, such as Tide, Gillette, Pampers and Crest. This enables the company to command premium pricing, maintain a strong market share, and stay competitive across sectors like home care, personal care and health care. Operating in more than 180 countries, P&G benefits from a broad revenue base, capitalizing on growth in emerging markets while ensuring consistent returns in established regions.Despite facing challenges in key markets like Greater China and geopolitical tensions in emerging regions, P&G’s focus on innovation and operational efficiency, including its Supply-Chain 3.0 program, positions it for continued success. The company’s strong fundamentals and global reach enable it to navigate uncertainties and deliver long-term value to shareholders.ConclusionAs Procter & Gamble prepares to release its second-quarter fiscal 2025 earnings, encouraging signs such as strong segment performance, effective pricing strategies, a favorable product mix, and a focus on productivity and cost savings are noteworthy. However, investors will also pay close attention to challenges in Greater China, geopolitical tensions and currency fluctuations before making any decisions.While P&G’s outlook remains positive, investors should exercise caution and wait for the right entry point to maximize portfolio gains. For those already holding the PG stock, patience is advisable, as the upcoming earnings report is expected to reinforce the company’s strong performance.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Procter & Gamble Company (The) (PG): Free Stock Analysis Report Colgate-Palmolive Company (CL): Free Stock Analysis Report The Clorox Company (CLX): Free Stock Analysis Report Church & Dwight Co., Inc. (CHD): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks