Executive summary
Procter & Gamble reported earnings for the first quarter of its fiscal 2026 on Friday, October 24. While beating analysts’ consensus estimates on core EPS ($1.99 vs. $1.90) and revenue ($22.40Bn vs. $22.19Bn), the stock closed at $152.49, nearly flat versus prior day close, after reaching an intra-day high of $157.40. Q1 organic sales growth was 2%, led by the Beauty and Grooming segments registering 6% and 3%, respectively. During the quarter, pricing and mix each contributed 1% to organic sales growth, while volume was flat. In summary, a solid quarter on revenue and earnings, leading management to maintain its fiscal 2026 guidance ranges.
What we like
Sales growth was broad based across categories and markets. Organic sales grew or held in 8 of 10 cat egories and in 6 of 7 regions. Regional highlights include Latin America, which grew organic sales 7%, driven by strong growth in Mexico and Brazil, and Greater China, which grew organic sales 5%. The Greater China results are a significant reversal of the challenges experienced recently, representing another sequential improvement and demonstration of momentum credited to digital commerce and distributor business interventions in that market.
In operations, productivity improvement efforts are taking hold in the face of a challenging cost environment. Resulting cost savings drove a 40-basis point improvement in currency neutral core operating margin, even while core gross margin was down 50-basis points. Strategically, gains from productivity improvement are largely being reinvested in innovation and demand creation.
What bears watching
Consumption in the Company’s categories decelerated throughout the quarter in North America, P&G’s largest market, with organic sales up 1% and unit volume flat. Management cited intense competitive promotional activity in North America as a contributing factor.
Year over year, global market share is down 30-basis points, driven by the cited competitor promotional activity in North America, particularly in the Fabric Care and Baby Care categories. Management notes that the decrease follows a strong base period and that sequentially, market share is improving. The Company’s strategic response is to invest in its brands through product and packaging superiority, which can take time to take hold.
In discussing fiscal 2026 guidance ranges, which the Company maintains, CFO Andre Schulten highlighted expected effects of port strikes, “As we consider phasing of top line growth, recall that Q2 last year benefited from two spikes in orders related to port strikes. The actual port strike that took place early October and the concern of another strike in January, these dynamics will likely result in Q2 this year being the softest growth quarter for the year with stronger growth in the back half.” This may be temporary, but bears watching closely as the year unfolds.
Bottom line
In fiscal 2026 Q1, P&G delivered positive top- and bottomline results that exceeded market expectations. Full year guidance ranges are maintained, forecasting 0-4% organic sales growth, and core EPS growth of 0-4%. P&G returned $3.8 billion to shareholders during the quarter, including $2.55 billion in dividends and $1.25 billion in share repurchases. Management guided to $15 billion of full year shareholder cash returns comprised of $10 billion in dividends and $5 billion in stock buybacks. The quarter represents a solid start to the year, demonstrating management’s commitment to its integrated growth strategy focused on reinvesting in its core, high quality brands fueled by gains from faithful execution of productivity plans. This operating discipline will be key to the Company’s success in navigating an ever-volatile external environment.