The Procter & Gamble Company PG has reported first-quarter fiscal 2027 core earnings of $2.00 per share, rising 1% year over year and beating the Zacks Consensus Estimate of $1.89. Higher sales and productivity savings supported earnings, partly offset by increased operating costs.
Net sales rose 4% year over year to $23.28 billion, surpassing the consensus mark of $22.71 billion. Organic sales grew 4%, driven by 2.4% volume growth, a 1.1% favorable mix contribution and a 0.4% pricing benefit. Foreign exchange had a neutral impact on sales growth. Our model predicted organic sales growth of 0.5% for the reported quarter.
Procter & Gamble Company (The) Price, Consensus and EPS Surprise
Procter & Gamble Company (The) price-consensus-eps-surprise-chart | Procter & Gamble Company (The) Quote
Fabric & Home Care remained the largest business, with sales increasing 4% year over year to $8.21 billion. Baby, Feminine & Family Care sales rose 3% to $5.32 billion. Beauty sales advanced 6% to $4.41 billion, while Health Care revenues increased 3% to $3.32 billion. Grooming sales grew 4% to $1.89 billion.
Beauty benefited from higher volumes, favorable product mix and currency gains. Fabric & Home Care benefited from a 4.3% volume increase, while favorable pricing and product mix supported Grooming. Health Care witnessed a 2.9% volume decline, partly offset by higher pricing and favorable mix.
Our model expected first-quarter fiscal 2027 sales to improve 6% for Beauty, 1% each for the Grooming and Fabric & Home Care segments, and flat sales for the Health Care segment. Sales for the Baby, Feminine & Family Care segment were expected to decline 1% in the reported quarter.
Procter & Gamble’s shares rose 3.3% following the earnings release. The Zacks Rank #3 (Hold) company’s shares have gained 9.4% year to date compared with the industry’s 8.7% growth.
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PG's Organic Sales Gain Across Categories
Beauty and Fabric & Home Care each recorded organic sales growth of 5% year over year. Within Beauty, Hair Care advanced in the mid-single digits, driven by innovation-based pricing in North America and Latin America, favorable product mix and higher volumes. Personal Care and Skin Care also delivered mid-single-digit organic growth.
Grooming organic sales increased 5%, supported by innovation-led pricing and favorable product mix. Health Care organic sales grew 3%, reflecting low-single-digit gains in Oral Care and Personal Health Care, although volume declines weighed on both businesses.
Baby, Feminine & Family Care registered 3% organic sales growth. Baby Care benefited from higher volumes in Greater China and North America and favorable premium mix. Feminine Care gained from favorable mix and innovation-based pricing, while Family Care benefited from volume growth, partially offset by merchandising investments.
Our model predicted organic sales growth of 4% for Beauty and 1% for Fabric & Home Care. Our model anticipated organic sales declines of 1% for Health Care and 2% for Baby, Feminine & Family Care for the fiscal first quarter. Meanwhile, we expected organic sales for the Grooming segment to be flat year over year.
PG's Margins Contract Despite Productivity Savings
Reported gross margin contracted 160 basis points (bps) year over year to 49.8%. Excluding incremental restructuring charges, the core gross margin declined 150 bps to 50%. Our model projected core gross margin expansion of 20 bps to 50.3%.
The core gross margin was pressured by 140 bps each due to elevated commodity costs and product reinvestments, alongside 50 bps in unfavorable mix. These impacts were partly offset by 120 bps of productivity savings, 50 bps of favorable tariff impacts and 20 bps of pricing benefits.
Core selling, general and administrative expenses declined 80 bps to 24.1% of sales. Productivity savings and sales leverage contributed 130 bps and 100 bps, respectively, partially offset by reinvestments. Consequently, the core operating margin contracted 80 bps to 25.9%, incorporating gross productivity savings of 250 bps. We expected the core operating margin to increase 230 bps year over year to 24.5%.
Procter & Gamble Generates Solid Cash Flow in Q1
The operating cash flow totaled $5.77 billion in the first quarter of fiscal 2027 compared with $5.41 billion in the prior-year quarter. Capital expenditure amounted to $1.37 billion, resulting in a free cash flow of $4.4 billion. The free cash flow productivity reached 93%.
PG returned $3.9 billion to shareholders, including $2.6 billion in dividends and $1.3 billion through share repurchases. As of Sept. 30, 2026, cash and cash equivalents totaled $15.37 billion, up from $9.94 billion at June 30, 2026.
PG Updates FY27 Sales Outlook
PG raised its fiscal 2027 all-in sales growth guidance to 2-4% from 1-3%, reflecting the acquisition of Thorne on Oct. 1, 2026. Management maintained its organic sales growth outlook of 1-3%, incorporating a 30-50-bps headwind from brand, product form and go-to-market discontinuations.
The company reaffirmed core earnings guidance of flat to up 3%, implying $6.89-$7.11 per share. The midpoint stands at $7, indicating 1.5% growth. Reported EPS is projected to increase 1-5%.
Management anticipates $1.4 billion in after-tax commodity cost headwinds, reflecting higher raw material, energy and transportation expenses. Higher net interest expenses, lower non-operating income and unfavorable currency are expected to add pressure.
Combined, these factors represent a 79-cent-per-share headwind, equivalent to an 11% drag on core EPS growth. The company expects a core effective tax rate of 20-21%.
PG projects free cash flow productivity of 85-90%, with capital spending estimated at 4.5-5.5% of net sales. It plans to distribute more than $10 billion in dividends and repurchase approximately $5 billion in common shares in fiscal 2027.
Stocks to Consider in the Consumer Staples Space
BJ's Wholesale Club Holdings Inc. BJ is a leading membership-based warehouse club operator concentrated primarily in the eastern half of the United States. The company currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for BJ's Wholesale’s current fiscal-year sales and earnings indicates growth of 11.7% and 6.8%, respectively, from the prior-year reported level. BJ delivered a trailing four-quarter earnings surprise of 4.8%, on average.
Grocery Outlet Holding Corp. GO is a high-growth, extreme value retailer of quality, name-brand consumables and fresh products that are sold through a network of independently owned and operated stores. The company currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Grocery Outlet’s current fiscal-year sales and earnings indicates declines of 0.3% and 27.6%, respectively, from the year-ago reported numbers. GO delivered a trailing four-quarter earnings surprise of 54.4%, on average.
Purple Innovation Inc. PRPL designs, manufactures, and sells sleep and other products in the United States and internationally. The company currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for Purple Innovation’s current fiscal-year sales indicates a decline of 8.5% from the prior-year level’s actual, while the earnings estimate suggests growth of 36.3%. PRPL delivered a trailing four-quarter earnings surprise of 21.3%, on average.
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Procter & Gamble Company (The) (PG): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).