Procter & Gamble Shares Lack Momentum Amid Mixed Quarterly Results

Procter & Gamble US7427181091

The consumer goods behemoth Procter & Gamble reported a mixed performance for its second fiscal quarter of 2026, revealing challenges in its core U.S. market and pressure on profitability. While earnings per share managed to edge past expectations, the company fell short on revenue, highlighting a broader struggle with demand and rising operational costs.

On January 22, P&G disclosed net sales of $22.21 billion. This figure represents a modest 1% year-over-year increase but fell below the $22.28 billion anticipated by market experts. Stripping out currency movements, organic growth was flat at zero. The company’s results were underpinned by a 1% contribution from price increases, which was entirely offset by a 1% decline in shipment volumes. Notably, three out of P&G’s five major product divisions reported lower volume.

The profit picture offered a slight reprieve. Core earnings per share came in at $1.88, narrowly surpassing the analyst consensus estimate of $1.86. However, on a GAAP basis, diluted earnings per share dropped 5% to $1.78, primarily due to elevated restructuring expenses. Net income also declined, falling 7% to $4.32 billion.

A breakdown of segment performance shows divergence:

• The Beauty unit led with a 5% sales increase, fueled by strength in hair care products.
• Health Care also posted solid growth of 5%.
• In contrast, the Baby, Feminine & Family Care segment saw a 3% sales decline, which management attributed to inventory effects following anticipated port strikes in the prior-year period.
• Fabric & Home Care, the largest division with $7.69 billion in sales, recorded a 1% revenue gain but experienced stagnant volume.

Profitability Under Pressure

Margin compression emerged as a key concern. The adjusted gross margin contracted by 50 basis points to 51.9%. While productivity savings of 160 basis points and a 50-basis-point benefit from pricing provided a lift, several headwinds proved too strong. These included a 120-basis-point drag from an unfavorable product mix, 60 basis points from product investment costs, and another 60 basis points from higher tariff expenses.

P&G confirmed that tariffs are expected to increase after-tax costs by approximately $400 million for the full fiscal year. This represents a significant shift from prior guidance; management had initially projected a $100 million benefit from commodity costs but now anticipates a neutral impact overall.

Revised Guidance and Management Outlook

In light of higher restructuring charges, P&G has modestly adjusted its full-year GAAP earnings growth forecast. The company now expects growth in the range of 1% to 6%, down from the previous projection of 3% to 9%. The outlook for core earnings per share, however, was reaffirmed. P&G continues to anticipate growth of 0% to 4%, translating to a range of $6.83 to $7.09 per share.

CFO Andre Schulten expressed confidence, stating, "We have now completed what we expected to be the weakest quarter of the fiscal year." The leadership, including new CEO Shailesh Jejurikar, is banking on product innovation and a more stable demand environment in the latter half of the year. Further details on the company's strategic direction are expected when Jejurikar presents at the CAGNY conference in February.

During the quarter, P&G returned $4.8 billion to shareholders through a combination of $2.5 billion in dividend payments and $2.3 billion in share repurchases. Following the earnings release, the company's stock advanced approximately 2%.