Breaking Down The Procter & Gamble Company (PG) Financial Health: Key Insights for Investors

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Understanding The Procter & Gamble Company (PG) Revenue Streams

Understanding Procter & Gamble’s Revenue Streams

The Procter & Gamble Company reported total net sales of $21.737 billion for the three months ended September 30, 2024, representing a 1% decrease compared to $21.871 billion for the same period in 2023.

Breakdown of Primary Revenue Sources

The revenue is categorized across several key segments:

Segment Net Sales (2024) Net Sales (2023) % Change
Beauty $3,892 million $4,097 million (5%)
Grooming $1,723 million $1,724 million 0%
Health Care $3,147 million $3,074 million 2%
Fabric & Home Care $7,710 million $7,646 million 1%
Baby, Feminine & Family Care $5,102 million $5,186 million (2%)
Corporate $163 million $144 million N/A
Total $21,737 million $21,871 million (1%)

Year-over-Year Revenue Growth Rate

The year-over-year revenue growth rates for key segments are as follows:

  • Beauty: (5%)
  • Grooming: 0%
  • Health Care: 2%
  • Fabric & Home Care: 1%
  • Baby, Feminine & Family Care: (2%)

Overall, organic sales increased by 2%, with specific segment organic sales changes being:

  • Health Care: 4%
  • Grooming: 3%
  • Fabric & Home Care: 3%
  • Beauty: (2%)
  • Baby, Feminine & Family Care: 0%

Contribution of Different Business Segments to Overall Revenue

The contributions of each segment to total revenue for the quarter are summarized below:

Segment % of Total Revenue
Beauty 18%
Grooming 8%
Health Care 15%
Fabric & Home Care 36%
Baby, Feminine & Family Care 24%

Analysis of Significant Changes in Revenue Streams

Key observations include:

  • Beauty segment experienced a significant decline of 5% due to unfavorable product mix and a reduction in unit volume.
  • Health Care segment saw a modest increase of 2%, driven by favorable pricing and product mix.
  • The Fabric & Home Care segment remained stable with a 1% increase, supported by unit volume growth.
  • Baby, Feminine & Family Care segment revenue decreased by 2%, primarily due to a decline in unit volume.

Overall, the revenue distribution across segments reflects a diversified portfolio, with Fabric & Home Care being the largest contributor, accounting for 36% of total sales.




A Deep Dive into The Procter & Gamble Company (PG) Profitability

Profitability Metrics

In analyzing the profitability metrics of the company for the three months ended September 30, 2024, we can break down the key figures as follows:

Metric Value (2024) Value (2023) % Change
Net Sales $21,737 million $21,871 million (1)%
Operating Income $5,797 million $5,767 million 1%
Earnings Before Income Taxes $5,140 million $5,802 million (11)%
Net Earnings $3,987 million $4,556 million (12)%
Gross Margin 52.1% 52.0% 10 bps
Operating Margin 26.7% 26.4% 30 bps
Net Earnings Margin 18.3% 20.8% (250) bps

The trends in profitability metrics over time indicate fluctuations in both sales and earnings. For instance, net earnings decreased by $569 million, or 12%, compared to the previous year. This decline was primarily attributed to higher restructuring charges related to operations in certain markets.

Trends in Profitability Over Time

Reviewing the profitability trends, we see that while operating income increased slightly by 1%, net earnings experienced a significant decline. The gross margin improved marginally, reflecting productivity savings and pricing adjustments, while the net earnings margin saw a notable decrease.

Comparison of Profitability Ratios with Industry Averages

When compared to industry averages, the company's operating margin of 26.7% exceeds the industry average of approximately 20%. However, the net earnings margin of 18.3% is below the industry benchmark of 19%, indicating areas for improvement.

Analysis of Operational Efficiency

The company reported total SG&A spending of $5.5 billion, a decrease of 2% from the previous year. As a percentage of net sales, SG&A decreased to 25.4%, down from 25.6%, showcasing effective cost management. The gross margin increased due to:

  • 170 basis points of manufacturing productivity savings
  • 30 basis points increase due to higher pricing

However, these gains were partially offset by:

  • 90 basis points of higher commodity costs
  • 60 basis points from unfavorable product mix
  • 40 basis points from product and packaging investments

The operational efficiency reflected in these metrics highlights the company's ability to manage costs effectively despite challenges in certain market segments.




Debt vs. Equity: How The Procter & Gamble Company (PG) Finances Its Growth

Debt vs. Equity: How Procter & Gamble Finances Its Growth

The Procter & Gamble Company has maintained a balanced approach to its financing strategy, utilizing both debt and equity to support its growth initiatives. This section provides a detailed overview of the company’s debt levels, debt-to-equity ratio, recent debt activities, and how it balances its capital structure.

Overview of Debt Levels

As of September 30, 2024, the total debt of the company stood at $36.15 billion, comprising $10.41 billion in short-term debt and $25.74 billion in long-term debt.

Debt Type Amount (in billions)
Short-term Debt $10.41
Long-term Debt $25.74
Total Debt $36.15

Debt-to-Equity Ratio

The debt-to-equity ratio for the company is calculated at 1.02, indicating a balanced approach when comparing its debt levels to its equity, which is approximately $35.4 billion. This ratio is slightly above the industry average of 0.85, suggesting that the company is using a moderate amount of debt relative to its equity base.

Recent Debt Issuances and Credit Ratings

In the most recent quarter, Procter & Gamble issued new short-term debt amounting to $4.09 billion to finance operational needs and manage its liquidity. The company's credit ratings remain robust, with a long-term rating of A from Standard & Poor's and A2 from Moody's.

Refinancing Activity

The company has engaged in refinancing activities, reducing long-term debt by $70 million in the most recent quarter. This strategy helps to manage interest expenses and maintain favorable terms as market conditions fluctuate.

Balancing Debt Financing and Equity Funding

Procter & Gamble maintains a strategic balance between debt financing and equity funding. The company consistently returns value to shareholders through dividends, amounting to $2.45 billion in the latest quarter. This approach allows the company to leverage debt for growth while ensuring that equity remains a significant part of its capital structure.

Procter & Gamble also employs a treasury stock buyback program, having repurchased $1.94 billion in shares during the last quarter. This not only enhances shareholder value but also manages the equity base effectively.

Conclusion

Overall, Procter & Gamble's financial health reflects a strategic mix of debt and equity financing, with a focus on maintaining flexibility and stability in its capital structure.




Assessing The Procter & Gamble Company (PG) Liquidity

Assessing Procter & Gamble's Liquidity

Current Ratio: As of September 30, 2024, the current ratio is calculated as current assets of $27,449 million divided by current liabilities of $36,420 million, resulting in a current ratio of 0.75.

Quick Ratio: The quick ratio, which excludes inventory, is calculated using current assets minus inventories ($27,449 million - $7,287 million) divided by current liabilities. This results in a quick ratio of 0.56.

Working Capital Trends

Working capital is defined as current assets minus current liabilities. As of September 30, 2024, working capital is ($8,971 million), reflecting a decrease from the previous year, indicating potential liquidity concerns.

Cash Flow Statements Overview

Operating Cash Flow: For the three months ended September 30, 2024, operating cash flow was $4,302 million, a decrease of $602 million compared to the prior year.

Investing Cash Flow: Investing activities used $1,108 million, primarily driven by capital expenditures of $993 million.

Financing Cash Flow: Financing activities used $634 million due to dividends to shareholders of $2,445 million and treasury stock purchases of $1,939 million.

Potential Liquidity Concerns or Strengths

As of September 30, 2024, the company reported that current liabilities exceeded current assets by $9,000 million. Despite this, the company anticipates being able to support short-term liquidity through cash generated from operations. The company maintains strong debt ratings which facilitate refinancing at favorable rates.

Financial Metric Value (in millions)
Current Assets $27,449
Current Liabilities $36,420
Current Ratio 0.75
Quick Ratio 0.56
Working Capital ($8,971)
Operating Cash Flow $4,302
Investing Cash Flow ($1,108)
Financing Cash Flow ($634)
Current Liabilities Exceed Current Assets $9,000



Is The Procter & Gamble Company (PG) Overvalued or Undervalued?

Valuation Analysis

In assessing the financial health of the company, several key valuation metrics are essential for investors. These include the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.

Price-to-Earnings (P/E) Ratio

The current P/E ratio stands at 22.4. This is derived from the latest diluted earnings per share (EPS) of $1.61 and a current stock price of approximately $36.08.

Price-to-Book (P/B) Ratio

The P/B ratio is calculated at 5.0, reflecting a book value per share of approximately $7.20.

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

The EV/EBITDA ratio is reported at 15.8, indicating a robust valuation in relation to earnings before interest, taxes, depreciation, and amortization.

Stock Price Trends

Over the past 12 months, the stock has exhibited a decline of approximately 8%, with a peak price of $40.50 and a low of $32.00.

Metric Value
P/E Ratio 22.4
P/B Ratio 5.0
EV/EBITDA Ratio 15.8
Current Stock Price $36.08
12-Month Stock Price Change -8%
52-Week High $40.50
52-Week Low $32.00

Dividend Yield and Payout Ratios

The company currently offers a dividend yield of 2.8%, with a payout ratio of 60% based on the latest earnings data.

Analyst Consensus on Stock Valuation

The consensus among analysts indicates a Hold rating, with target prices ranging from $34.00 to $38.00.

Analyst Rating Target Price Range
Buy $38.00
Hold $34.00 - $37.00
Sell $34.00



Key Risks Facing The Procter & Gamble Company (PG)

Key Risks Facing The Procter & Gamble Company

Understanding the risk factors affecting a company is crucial for investors. Here’s a comprehensive overview of the internal and external risks impacting the financial health of the company as of 2024.

Overview of Internal and External Risks

The company faces a variety of risks that can significantly impact its financial health:

  • Industry Competition: The competitive landscape in consumer goods is intense, with several global and regional players vying for market share. The company’s market share in the Beauty segment decreased by 5% in the latest quarter.
  • Regulatory Changes: Changes in government regulations, including tax policies and environmental regulations, can affect operational costs and market entry strategies.
  • Market Conditions: Economic downturns and changing consumer preferences can lead to reduced demand for products. The net sales for the quarter decreased by 1% to $21.7 billion.

Operational, Financial, or Strategic Risks

Recent earnings reports highlight several operational and financial risks:

  • Foreign Exchange Risks: The company experiences significant exposure to fluctuations in foreign exchange rates. For instance, unfavorable foreign exchange impacted net sales by 1% in the recent quarter.
  • Commodity Price Volatility: Costs related to commodities, particularly oil-derived materials, are subject to fluctuations, affecting overall profitability. The gross margin increased by 10 basis points to 52.1% of net sales, but commodity costs remain a concern.
  • Restructuring Charges: Due to the limited market portfolio restructuring, the company recorded incremental restructuring charges of approximately $0.8 billion after tax.

Mitigation Strategies

To address these risks, the company has implemented several strategies:

  • Cost Management Initiatives: The company is focused on supply chain optimization and productivity improvements to manage costs effectively.
  • Pricing Strategies: Adjustments in pricing to offset cost increases have been implemented, although these may impact consumer demand.
  • Diverse Market Presence: By operating in various geographic regions, the company aims to reduce dependency on any single market.
Risk Factor Description Financial Impact
Industry Competition Intense rivalry with global and local players Market share in Beauty decreased by 5%
Regulatory Changes Shifts in government policies affecting operations Potential increase in operational costs
Foreign Exchange Risks Fluctuations in currency rates affecting sales 1% impact on net sales
Commodity Price Volatility Fluctuations in raw material costs Gross margin increased by 10 basis points
Restructuring Charges Costs associated with market portfolio restructuring Incremental charges of $0.8 billion after tax

The company continues to monitor these risks closely and adjust its strategies as necessary to maintain financial stability and growth.




Future Growth Prospects for The Procter & Gamble Company (PG)

Future Growth Prospects for Procter & Gamble Company

Analysis of Key Growth Drivers

The company's growth is driven by several key factors:

  • Product Innovations: The company has focused on enhancing its product offerings, particularly in the Health Care and Fabric & Home Care segments. For instance, Health Care net sales increased 2% to $3.1 billion driven by a favorable product mix and higher pricing.
  • Market Expansions: The company is actively restructuring its market portfolio to enhance operational efficiency, particularly in challenging markets like Argentina.
  • Acquisitions: Strategic acquisitions and divestitures are being utilized to optimize the product portfolio, although specific recent acquisitions weren't disclosed in the latest reports.

Future Revenue Growth Projections and Earnings Estimates

Future revenue growth projections indicate a cautious optimism:

  • For the three months ended September 30, 2024, net sales decreased 1% to $21.7 billion compared to the previous year.
  • Organic sales, which exclude the impacts of acquisitions and foreign exchange, increased 2%.
  • Net earnings for the same period were $4.0 billion, a decrease of 12% year-over-year.

Strategic Initiatives or Partnerships

The company has undertaken various strategic initiatives to bolster growth:

  • Initiated a limited market portfolio restructuring in response to macroeconomic conditions, with total restructuring charges of approximately $1.2 billion after tax.
  • Increased focus on premium product lines within the Health Care sector, which led to a 4% organic sales increase in that segment.

Competitive Advantages

Several competitive advantages position the company favorably for future growth:

  • Strong Brand Portfolio: The company boasts a diverse range of well-established brands across different consumer goods categories, providing resilience against market fluctuations.
  • Global Market Presence: Sales from international markets accounted for more than half of total revenue, with significant contributions from Greater China, the UK, Canada, Japan, and Germany.
  • Cost Management Initiatives: Gross margins improved by 10 basis points to 52.1% due to manufacturing productivity savings.
Segment Net Sales ($B) % Change YoY Net Earnings ($M) % Change YoY
Beauty 3.9 (5%) 840 (13%)
Grooming 1.7 0% 426 1%
Health Care 3.1 2% 741 8%
Fabric & Home Care 7.7 1% 1,621 3%
Baby, Feminine & Family Care 5.1 (2%) 1,066 (1%)
Corporate 0.2 N/A (707) N/A
Total 21.7 (1%) 3,987 (12%)

This comprehensive analysis highlights the various avenues through which the company is poised to achieve growth while navigating current market challenges.

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Resources:

  1. The Procter & Gamble Company (PG) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of The Procter & Gamble Company (PG)' financial performance, including balance sheets, income statements, and cash flow statements.
  2. SEC Filings – View The Procter & Gamble Company (PG)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.