P&G Stock: Riding High After An Upbeat Q2 - What Lies Ahead?

Procter & Gamble (NYSE: PG) recently reported its Q2 fiscal 2025 results (P&G’s fiscal ends in June), with revenues and earnings comfortably ahead of the street estimates. The company reported revenue of $21.9 billion and adjusted earnings of $1.88 per share, compared to the consensus estimates of $21.5 billion and $1.86, respectively. P&G benefited from an uptick in sales of household staples. PG stock rose 5% in a week, thanks to its upbeat results.

PG stock is up 15% since the beginning of 2024, underperforming the broader S&P500 index, up 28%. The falling sales in China have been one of the factors that has weighed on PG stock performance lately. However, if you want upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

Procter & Gamble’s revenues of $21.9 billion reflected a 2% y-o-y rise. While the company saw its pricing remain flat, volume was up 1%, and it saw a 1% contribution from product mix. Looking at segments, Beauty sales were flat y-o-y. Within Beauty, sales for skin care products saw a low single-digit decline due to lower volume. Hair care sales were down in mid-single-digits, while personal care sales were up in double-digits. Grooming sales were up 1% and Health Care revenue was up 2% mainly due to favorably product mix. Fabric & Home Care sales were also up 2% on volume gains. Baby, Feminine & Family Care sales were up 3%, primarily due to strong sales for family care.

P&G reported an 80 bps contraction in core operating margin to 26.2% in Q2. P&G posted a 2% y-o-y growth in adjusted earnings per share to $1.88, as the margin contraction was more than offset by higher revenue and a decline in shares outstanding. Looking forward, P&G has maintained its organic sales growth outlook of 3% to 5% in 2025, and earnings per share to be in the range of $6.91 and $7.05.

What Does This Mean For PG Stock?

Amid an upbeat Q2, PG stock has seen a 5% rise in a week. But, if we look at a slightly longer period, the increase in PG stock over the last four-year period has been far from consistent, although annual returns were considerably less volatile than the S&P 500. Returns for the stock were 21% in 2021, -5% in 2022, -1% in 2023, and 17% in 2024.

The Trefis High Quality Portfolio, with a collection of 30 stocks, is less volatile. And it has comfortably outperformed the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment around rate cuts and changes in the White House, could PG face a similar situation as it did in 2021, 2023, and 2024 and underperform the S&P over the next 12 months — or will it see a strong jump? We estimate for Procter & Gamble’s Valuation to be $175 per share, close to its current market price. Our forecast is based on a 25x P/E multiple for PG and expected earnings of $6.94 on a per share and adjusted basis for the full fiscal 2025. The 25x figure aligns with the stock’s average P/E ratio over the last five years.

While PG stock looks like it has little room for growth, it is helpful to see how Procter & Gamble’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

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