Consumer goods titan Procter & Gamble (PG 0.74%) will post earnings results for its fiscal third quarter on April 26. Here's what investors need to know heading into the announcement.

Sales growth

P&G's sales gains have been disappointing over the past two fiscal years, but 2017 is looking much brighter. Following last year's 1% uptick, organic sales came in ahead of management's expectations in each of the first two quarters of this year, rising by 3% in fiscal Q1 and by 2% in Q2.

Better still, the latest gains have been driven by a healthy mix of volume growth and higher pricing, which implies that the company may finally be on the verge of ending a disappointing two-year market-share slide. In fact, CEO David Taylor and his executive team recently had enough confidence in the business that they boosted their full-year growth outlook to 2.5% from 2%, which would put P&G ahead of rival Kimberly-Clark and its projected 2% increase.

A young woman shopping for detergent.

Image source: Getty Images.

Drilling deeper into the results, investors will be looking for evidence that the company has ended market-share losses in key brands like Gillette with help from increased marketing, aggressive sampling programs, and stepped-up innovation.


Cost cuts aren't a long-term solution to slumping sales, but they can be a powerful strategic tool that simplifies the business while leaving room for investments in attractive growth opportunities. That's the path P&G has been trying to navigate lately as it sliced billions of dollars out of its expense infrastructure, removed 100 less-profitable brands from the portfolio, and reduced its manufacturing footprint.

The results so far have been encouraging. Core gross margin jumped 1.2 percentage points higher last quarter thanks mainly to progress in the company's $10 billion cost-cutting program.

PG Operating Margin (TTM) Chart

PG Operating Margin (TTM) data by YCharts.

Executives see plenty of room for additional slices ahead that ideally will keep P&G near the top of its industry in terms of profitability. Just as important, this fiscal year is the first one in which Taylor and his team are managing the slimmed-down portfolio that they want -- one that they believe will produce a full percentage point of higher profitability than in the past. Thus, shareholders will be watching for evidence of improving gross and operating profit margins this week.

Cash returns

One of the biggest benefits of P&G's decision to transform into a smaller, more profitable enterprise is that it is funding one of the stock market's most generous cash-return programs. The company is on track to send $22 billion to shareholders just this fiscal year.

Sure, most of those returns are coming in the form of stock repurchases, and so it will take time before investors know for sure whether they were smart uses of capital. Yet the improved cash position has also produced stepped-up dividend growth. P&G earlier this month announced a 3% increase to its payout -- its 61st straight -- to mark a solid acceleration over last year's tiny 1% raise.

This week, management will likely comment on the rationale behind the aggressive dividend boost in the context of a capital return program that should send $70 billion to shareholders in the four fiscal years ending in 2019.

Of course, big cash returns over the next few years won't mean much to investors if the company hasn't also returned to market-beating sales growth. The first half of fiscal 2017 marked a small step in that direction, and shareholders will soon learn whether that encouraging momentum held up into the back half of the year.