What Can We Learn From Procter & Gamble’s (NYSE: PG) Earnings

Procter & Gamble (NYSE: PG) is set to report earnings today, and I’m interested to see what they’ll say.

Specifically, I think the report will give us some more insight on how companies are coping with tariffs and wary consumers.

Indeed, P&G is a bellwether if there ever was one. It’s amassed some of the world’s biggest brands — Tide, Pampers, Old Spice, Bounty, Cascade, Dawn, Crest, Gillette, and more — into a $370 billion business.

That footprint in consumer staples can act as a bit of a weathervane for spending sentiment. It’s also vast enough that it can’t help but be compromised by tariffs. 

That’s a big reason why the stock is down more than 6% this year and in fact has been trending down since last November.

In April, P&G management said that tariffs were driving up the prices for some finished products from China, but that the bigger issue was higher costs for raw ingredients and packaging materials.

In all, P&G estimated the cost of the tariffs would total as much as $1.5 billion annually. 

This has forced the company to pursue new sourcing options, stop selling certain products to certain markets, and cut jobs. 

In June, the company announced that it would cut up to 7,000 jobs in the next two years — approximately 6% of its global workforce and 15% of its non-manufacturing positions — in an effort to cut costs, improve efficiency, and mitigate the negative impact of tariffs. 

But unfortunately for P&G, that’s not the only problem the company currently faces. 

President Trump’s tariff policy — and the erratic way he’s implemented it — have thrown consumers off balance, as well. 

Consumer spending and sentiment have both been shaky and could deteriorate further as more costs get passed on to consumers. 

That is, many businesses and retailers loaded up on equipment, ingredients, input materials, and finished products before the tariffs were set to go into effect. As those inventories wind down, they’ll now need to be replaced at a higher cost.

The challenging landscape is what led JPMorgan to downgrade P&G shares from an “Overweight” weighting to “Neutral.”

Specifically, the bank warned that the company’s organic sales growth will remain soft for the next few quarters.

JPMorgan’s forecast now estimates that P&G will see 1.9% organic growth in the fiscal fourth quarter, slightly below its prior estimate. Though its full-year forecast of 2% growth is in line with the company’s outlook.

Meanwhile, Wall Street’s consensus estimate for the most recent quarter has revenue growing 1.6%, to $20.85 billion.

So, effectively, we’re going to learn two things from this report… 

First, whether or not consumers have brushed off the tariff threat and firmed up their spending…

And second, has Procter & Gamble done enough to offset, overcome, or avoid higher input costs?

The answer to those questions will say a lot about the broader economy as well as other major brands (like Coca-Cola and General Mills) and major household retailers (like Walmart and Target). 

I will say, however, that for a company like P&G, these are mostly short-term concerns.

After all, it's been in business since 1837, and it'll still be in business selling diapers and deodorants for years, decades, or even centuries to come.

So if you have a long-term horizon, now might be an opportunistic time to buy — especially considering the stock’s long history of dividend payouts.

It currently yields about 2.7%.