Procter & Gamble stock falls on sales miss; company raises forecast

Procter & Gamble on Thursday reported quarterly revenue that fell short of estimates for the first time in five quarters, hurt by a stronger dollar and a struggling baby segment, which includes Pampers diapers.

Investors focused on the sales shortfall, sending shares down 1% in premarket trading, despite better-than-expected earnings and an increased fiscal 2020 forecast.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

• Earnings per share: $1.42, adjusted, vs. $1.37 expected
• Revenue: $18.24 billion vs. $18.37 billion expected

P&G reported fiscal second-quarter net income of $3.72 billion, or $1.41 per share, up from $3.19 billion, or $1.22 per share, a year earlier.

Excluding items, the consumer giant earned $1.42 per share, topping the $1.37 per share expected by analysts surveyed by Refinitiv.

Net sales rose 5% to $18.24 billion, falling short of expectations of $18.37 billion. Stripping out the impacts of foreign exchange, acquisitions and divestitures, organic sales increased 5%, helped by strong growth in its health care and beauty units.

Its health care business, which includes brands like Vicks and Oral B, saw organic sales growth of 7%, and its beauty business reported 8% organic sales growth, driven by double-digit growth in skin and personal care products, which include SK-II and Olay. P&G’s fabric and home care business, which includes brands like Tide and Ariel, saw organic sales increase by 5% during the quarter.

Organic sales of P&G’s baby care segment declined by low-single digits. The company attributed the decrease to competition, fewer customers buying baby products in certain markets and an inventory decrease in Japan due to an increase in the country’s value-added tax.

Rival Kimberly-Clark, which owns Huggies diapers, said Thursday that its volumes for baby and child care declined by mid-single digits during its fiscal fourth quarter.

Organic sales of P&G’s shaving segment, which includes Gillette and Venus, rebounded to low-single digit growth during the quarter, thanks to innovation and price increases driven by devaluation.

In early January, the company announced plans to acquire Billie, a direct-to-consumer shaving company aimed at women. P&G has been trying to reignite sales for its Gillette and Venus products as Billie, Unilever’s Dollar Shave Club and Edgewell Personal Care’s Harry’s lure away its customers.

P&G now expects sales growth of 4% to 5% in fiscal 2020, up from its prior range of 3% to 5%. It also expects core earnings per share to increase to a range of 8% to 11%, up from its prior range of 5% to 10%.

The company expects to buy back more shares during fiscal 2020. It raised its repurchase range to $7 billion to $8 billion, up from $6 billion to $8 billion. During its second quarter, P&G bought back $3.5 billion of common stock.

Shares of P&G, which has a market value of $309 billion, have risen nearly 31% over the last year.

The stock of rival Kimberly-Clark, valued at $49.5 billion, is up 28% in the same time period. Shares of the Kleenex owner were unchanged in premarket trading after it topped analyst estimates for its quarterly earnings and revenue and raised its quarterly dividend from $1.03 to $1.07.

Read the full earnings release here.