Procter & Gamble falls short of sales estimates: Is it still a strong long-term investment?

Procter & Gamble Co (NYSE: PG), the household staple known for its broad range of consumer goods, reported weaker-than-expected sales for the fourth quarter on Tuesday. 

Despite this, experts suggest the stock remains a strong long-term investment. 

Will McGough, Director of Investments at Prime Capital, advised investors to adopt a long-term perspective on P&G shares and not be overly concerned about the recent earnings miss.

For the quarter, P&G’s adjusted per-share earnings came in at $1.40, exceeding Street estimates by 3 cents. 

However, the company’s sales fell short of expectations, which has led to some uncertainty among investors. Full details of P&G’s earnings can be found here.

P&G CEO Jon Moeller remains positive

Despite facing ongoing challenges in China, P&G CEO Jon Moeller expressed optimism about the company’s performance. 

During an interview with CNBC, Moeller pointed out that while the Chinese market remains weak, P&G has seen strong unit volumes in Europe and the United States. He anticipates improvements in China over the medium to long term.

The company’s performance in Europe and North America has contributed to a significant boost in its gross margin, which increased by 350 basis points in fiscal 2024—marking the highest gross margin in 17 years. 

P&G also announced plans for a 10% increase in dividend payments for fiscal 2025, reflecting its robust financial health and commitment to returning value to shareholders. 

With a dividend history extending over 134 consecutive years and 68 consecutive years of increases, P&G’s track record remains unmatched by most S&P 500 companies.

Sarat Sethi recommends caution in buying P&G stock

Despite P&G’s strong fundamentals and historical dividend performance, not all analysts are enthusiastic about the stock at current levels. 

Sarat Sethi of Douglas C. Lane & Associates recommended caution, advising against new investments in P&G due to concerns over the company’s revenue growth and the challenges in the Chinese market.

“If I owned it, I wouldn’t sell it. But I wouldn’t put new money in,” Sethi told CNBC. 

He suggested that investors wait for a potential pullback before considering new investments in the stock. 

With P&G’s share price down approximately 6% in premarket trading following the earnings report, Sethi might reconsider his position as the stock could present a buying opportunity.

Currently, Wall Street analysts have a positive outlook on P&G, with an average price target of $176 per share. 

This represents a potential upside of about 10% from current levels, indicating that, despite short-term challenges, there is still room for growth in the stock.

While Procter & Gamble’s recent earnings report showed some weaknesses, the company’s strong dividend history, improved margins, and positive outlook from Wall Street suggest it remains a compelling long-term investment. 

Investors should weigh the potential for short-term volatility against the company’s solid fundamentals and historical performance when making investment decisions.

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