Procter & Gamble (NYSE:PG) on Tuesday posted its first quarterly earnings report since a dramatic proxy challenge led to a shakeup in its board of directors. The results kept the consumer products giant on track to meet its modest objectives for the fiscal year, but they didn't do much to quiet shareholder concerns about persistent market share losses.

Here's how the headline results stacked up against the prior-year period: 


Q2 2018

Q2 2017

Year-Over-Year Change


$17.4 billion

$16.9 billion


Net income

$2.6 billion

$7.9 billion


Earnings per share




Data source: Procter & Gamble's financial filing.

What happened this quarter?

Sales growth sped up compared to the previous quarter thanks to solid volume gains. P&G's reported profits dove, meanwhile, but only because of a massive one-time benefit that lifted the prior-year period's results. Core earnings held steady as a slight drop in gross profit margin was offset by reduced expenses.

Procter & Gamble logo.

Image source: P&G.

Highlights of the period include:

  • Organic sales growth stopped at 2%, compared to 1% in the fiscal first quarter. That increase was comprised entirely of higher sales volume, with average prices holding steady.
  • Health care was P&G's strongest segment. It benefited from solid demand for new Oral-B electric toothbrushes and from an unusually intense cold and flu season.
  • The shave care business continued to shrink, with aggressive price cuts in the Gillette franchise being just partially offset by rising volumes. P&G also struggled in the baby care division as Pampers diaper sales were challenged by aggressive price-based competition.
  • Gross profit margin dropped slightly due to rising commodity costs and weak pricing. However, savings in other areas of the business offset that decline to keep operating margin unchanged.
  • P&G's reported earnings slump was entirely due to the one-time profit it earned last year when it sold off its beauty line. Earnings from continuing operations were steady at $0.96 per share.

What management had to say

Executives were happy with the mix of financial and operating wins they achieved. "We accelerated organic sales growth," CEO David Taylor said in a press release, "and delivered cost savings and cash flow." These successes kept the business chugging along at the pace management originally set out for fiscal 2018. "We remain on track to achieve our fiscal year objectives," Taylor noted. They also leave the company well positioned to deliver plenty of cash to shareholders through stock buybacks and dividend payments.

Looking forward

P&G is still targeting organic sales growth of between 2% and 3% this year to mark a slight improvement over last year's 2% gain. That's a bit higher than the 1% increase rival Kimberly Clark is expecting, but the expansion rate would still translate into a fourth consecutive fiscal year of minor market share losses.

Tide Pods and detergent.

Image source: P&G.

As a result, P&G's new board of directors, which take their seats in early March, should have plenty to debate about the company's broader growth strategy.

Taylor and his team said in December that the message they received from last year's shareholder proxy challenge was that the company "needs to move faster to deliver improved results." Investors are still waiting for evidence of that growth acceleration, so potentially aggressive strategic shifts remain likely in the quarters to come.

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