Procter & Gamble (NYSE:PG) turned in another quarter of strong results led by growth in every category. The consumer goods powerhouse is delivering an impressive balance of top- and bottom-line performance with organic sales, margins, and profits all showing improvement last quarter.

Here's what you need to know.

A range of oral care products from the Oral B and Crest brand family.

Image source: Procter & Gamble. 

Balanced growth

Procter & Gamble continues to flex its muscle in the marketplace, executing well at the retail level and gaining market share. Over the last five quarters, organic sales have steadily improved from 4% in fiscal Q1 2019 to 7% in the most recent quarter. The impressive thing is that sales have been driven by a balance of both volume gains and price increases. Price increases are good, because they reflect brand power, but they don't mean much in the long run if there is no volume growth. In the last quarter, P&G achieved 4% organic volume growth and a 3% increase in pricing.

Management has spent the last few years investing in product performance, packaging, retail execution, marketing, and delivering value at all price points. Those efforts are paying off, with P&G experiencing solid gains with higher-priced products, such as Olay skin brands and premium Crest toothpastes. 

Strong sales of premium products are helping improve margins, as CFO Jon Moeller alluded to during the fiscal first-quarter conference call:

We've focused and strengthened our portfolio in daily use categories where performance drives brand choice in categories where we occupy a No. 1 or No. 2 position, which have historically grown faster than the balance of the company and are more profitable. 

Concurrent with that strategy, CEO David Taylor has steered the company toward balanced top- and bottom-line growth, which is counter to the thinking at industry peers that have focused exclusively on improving sales or profits but not both. 

P&G is in the second five-year plan to cut $10 billion of costs out of operations. Strong sales of higher-margin products and cost savings improved adjusted operating margin by 260 basis points last quarter. This drove core (non-GAAP) earnings per share up 22% year over year. 

The company is delivering the best of both worlds to investors: market share gains with strong sales on the top line, coupled with higher margins and free cash flow. In the last quarter, free cash flow improved by 24% year over year to $3.1 billion. Management returned $1.9 billion in dividends and $3.0 billion in share repurchases. The total capital return of nearly $5 billion was 59% higher than the year-ago quarter. 

Staying ahead of the curve

Competitors have noticed the momentum at P&G and will try to counter. Moeller emphasized the need to disrupt and streamline the company's operations to stay ahead of the curve. He said:

We're making an organization structure and culture changes to better position us to win. We're taking steps to simplify the organization, focusing effort, clarifying responsibility, increasing accountability, and structuring compensation and incentive programs to better align with these objectives. 

In July, the company moved to simplify reporting lines and strengthen leadership accountability. P&G is also making changes to the supply chain to get faster at meeting consumer needs, as Moeller explained during the call:

We're disrupting the way we innovate by accelerating the speed and quality of our learning through lean innovation. We're monetizing innovation across industries to accelerate investment in R&D and broaden societal impact. We're disrupting in retail execution, we're reinventing brand building from wasteful mass marketing to mass one-to-one brand building, fueled by data and technology. 

Funding these efforts are the substantial cost savings being taken out of the business. In the last quarter, reported sales increased 7%, while operating costs increased just 3%. This leverage is allowing much of the incremental sales to fuel robust gains in profits, as reflected in the 21% increase in operating profit last quarter.

P&G is back

Accelerating growth has translated to an increase in the stock price of 36% this year. Higher capital returns should be coming as well. The company expects to return a total of $13.5 billion to $15.5 billion to shareholders in fiscal 2020 (which ends in June) -- $7.5 billion in dividends and $6 billion to $8 billion in share repurchases. 

Based on the strong start to the year, management also raised its outlook for organic sales growth to a range of 3% to 5%. Adjusted earnings are now expected to be up 5% to 10%, which is one point higher on the low and high ends from previous guidance. 

Procter & Gamble was a slow-growing stalwart a few years ago. With $68.8 billion in trailing 12-month revenue, it's not a nimble ship to turn around, but this consumer staples giant is moving at full speed now.