Procter & Gamble Proves It’s No Gamble: Uptrend Remains Strong

Key Points

• Procter & Gamble outperformed in FQ2 and is on track to produce solid results in 2025.
• Capital returns are central to the story, and they include buybacks, dividends, and a healthy outlook for distribution growth. 
• Analysts' sentiment is firm; this stock is a good buy, and the targets see it advancing to new highs this year. 

Procter & Gamble NYSE: PG proved again it is no gamble for investors, but a solid blue-chip company that can improve its shareholder value over time. The stock price may pull back, and the market may experience volatility, but it trends higher, and the chart is showing a trend-following signal early in 2025. The FQ2 2025 earnings report sparked the signal, which may lead to a new all-time high this year.  Regardless of when the new high is set, a new high is likely, and until then, there are capital returns to keep the market interested. 

The share buybacks aren’t robust but sufficient to offset dilutive activities and reduce the count incrementally each quarter. Buybacks in FQ2 amounted to $2.5 billion shares, doubling the $2.4 billion spent on dividend distribution, reducing the count by roughly 0.4%. Regarding the dividend, the stock yields about 2.5% in mid-January, at the high end of the historical range and a value for investors. The stock trades about 24x its earnings compared to the historical 28x average, suggesting the upswing in price action could be vigorous. A 4x multiple expansion to align with the ten-year average is worth more than 16% upside in addition to dividend distribution and an attractive gain for any dividend investor. 

The analyst's sentiment and trends align with the outlook for higher PG stock prices. The trend includes increased coverage and a price target relative to January 2024. The consensus figure is up nearly 800 basis points and indicates an 8% increase from the critical 30-day EMA the day of the release. The most recent activity includes price target reductions to align with the consensus, a headwind likely to disappear now that Q2 results are in. Analysts are more likely to increase than decrease their targets given the strength in volume growth and the outlook for economic tailwinds to develop. 

Procter & Gamble Outperforms in FQ2, Cautiously Reaffirms Guidance for 2025

Procter & Gamble didn’t have a robust second quarter, but the data is good and signals strength for consumer and retail businesses across many segments. The company’s $21.9 billion in revenue is up 2.1% compared to the prior year, $0.310 better than the consensus reported by MarketBeat. The 140 basis points of strength are due to a 3% organic gain driven by a 2% increase in volume and a 1% gain from the mix. Pricing did not impact the results, revealing a solid consumer base. Beauty grew the smallest amount, 2% organically, with Baby, Feminine, and Family Care leading at +4%. Family Care was the strongest within the BFF segment, with a double-digit quarterly sales increase. 

The margin news is also good. The company experienced margin pressure, but efforts to control costs and improve efficiency offset it by 260 basis points. The net result is an 80 basis points contraction in the core operating margin and $1.88 in adjusted earnings, up 2% compared to the 2.1% revenue increase and $0.02 ahead of forecasts. 

The forecast for this year is decent. The company didn’t raise guidance but reaffirmed its outlook for earnings growth. The critical takeaway is that the adjusted $6.91 to $7.05 range has a mid-point above the consensus outlook and is favorable for the market. Ultimately, the capital return outlook is affirmed, including distribution increases. Procter & Gamble is a Dividend Aristocrat and Dividend King, paying less than 60% of its earnings and able to sustain the mid-single-digit CAGR it has been running. The outlook is for 5% to 6% earnings per share growth in 2025 and a slight acceleration in 2026.

Procter & Gamble Fires a Trend-Following Signal

Following the Q2 release, Procter & Gamble shares surged 3% to confirm support above their uptrend line and long-term moving average. The move also put the market above another critical moving average, the 30-day EMA, which suggests buying among short-term traders and speculators. The move looks strong because of the increased volume; the likely outcome is a move to retest resistance at the recent highs. The critical resistance is near $180 to $185 and may be reached before mid-year.