Procter & Gamble (NYSE:PG) showed off its business strength in its recent earnings report, which included strong sales, surging profits, and soaring cash flow. The results kept P&G right on pace for another successful fiscal year, even compared to 2020's pandemic-influenced growth.
In a conference call with investors, CFO Jon Moeller broke down the earnings and sales metrics while explaining the optimistic outlook for the rest of the fiscal year. Let's look at some highlights from that presentation.
More than the pandemic
The strong momentum we've created over the past number of years -- top line, bottom line, and cash -- continued in the October-December quarter.
-- Jon Moeller, CFO
P&G's growth held up well compared to the prior quarter, even as demand slowed from earlier COVID-19 related spikes. Organic sales were up 12% year over year in the U.S. compared to 16% last quarter, mainly thanks to soaring demand for home cleaning and maintenance products.
But executives said that success was just an extension of the positive momentum P&G had built before the pandemic struck. The strength of the business was a key reason P&G kept its annual outlook in place through the retailing disruption in 2020 and felt confident enough to aggressively hike its dividend this past April.
A mixed bag
More time at home benefits our Family, Fabric and Home Care businesses. It negatively impacts Grooming, [skin care], deodorants, adult incontinence. So, COVID impacts are different, some positive and some negative across categories."
The transformative impact of the pandemic is clear from P&G's demand trends, which included 30% higher sales year over year in the home care category in the second quarter. But there were sales pressures, too, in areas like shaving care and skin care, that aren't as popular in the era of social distancing.
P&G listed several regional challenges, too, like retail closures and supply chain disruptions. Overall, though, management believes growth will settle down to a slightly higher rate as the COVID-19 threat is neutralized. "We expect some of the current tailwinds ... will dissipate," Moeller said, "but some very strong headwinds should also abate or disappear."
Looking further out
The relevance of our categories and consumers' lives potentially increases. We will serve what will likely become a forever-altered cleaning, health, and hygiene focus, for consumers who use our products daily or multiple times each day. There may be a continued increased focus on Home, more time at home, more meals at home, with related consumption impacts.
P&G lifted its annual outlook for the second straight quarter and now sees growth landing as high as 5% in fiscal 2021. The bigger picture is just as bright, since there's a good chance for permanently higher demand in some of its biggest product categories like home cleaning and supplies.
Pair that stronger outlook with P&G's improvements in key areas like profitability, cash flow, and market share, and there's every reason to expect additional market-beating returns for investors who hold this stock.
And the good news is that they won't have to wait long to see those gains. Instead, with $18 billion set to come to shareholders through dividends and stock buybacks this year alone, a big chunk of P&G's returns will come from direct cash in fiscal 2021.