Procter & Gamble (PG 0.54%) share price gains have spent the better part of the pandemic trailing the wider stock market. While sales and earnings soared since early 2020, the consumer staples giant was left out of the rally that pushed high-growth niches to new highs.
But that performance gap is shrinking as investors lose some of their appetite for many hot tech stocks. P&G has a chance to add to its positive momentum when the company announces fiscal 2022 second-quarter earnings results in a few days. Let's look at why the owner of global brands like Tide, Bounty, and Pampers might have good news for shareholders on Wednesday, Jan. 19.
Image source: Getty Images.
Sales trends
Wall Street is expecting sales to land at $20.4 billion for the period that ended in late December. While that figure would mark just a 3% increase year over year, it translates into significant growth for the world's leading consumer staples giant. Sales were $18.2 billion in the same period two years ago, and P&G's 3% uptick will come on top of its 8% spike a year ago.
Few companies can match that level of absolute growth, but P&G is also likely to impress when it comes to direct comparisons with industry peers. Look for CEO David Taylor and his team to highlight more market-share gains on Wednesday that keep revenue growing faster than that of rival Kimberly-Clark (KMB 0.97%). P&G should also show a better balance between rising prices and increased sales volumes while Kimberly-Clark leans more heavily on higher prices to boost organic sales.
Price hikes
Both companies have been busy raising prices over the last few months to offset rising costs. Those higher expenses weren't insignificant for P&G, either. Management expects inflation to erase $2.1 billion from earnings this fiscal year, in fact.
We'll learn this week whether that short-term earnings outlook worsened again, as it did three months ago. It's more likely, though, that P&G was able to pass along higher prices. Its market leadership position and its dominance of premium categories in the home maintenance, baby care, and fabric care niches have made it an inflation-resistant stock for decades. More success on that score will show up in P&G's gross profit margin, which is nearly 20 percentage points higher than Kimberly-Clark's.
PG Gross Profit Margin data by YCharts
The new outlook
A lot has changed since management updated its fiscal year outlook in late October. Major shifts included resurging pandemic threats, supply chain bottlenecks, and soaring costs for inputs like plastic, paper, and oil. Wednesday's report will clarify whether these challenges knocked P&G off its wider growth ambitions, which call for sales to rise by roughly 3% this year to mark just a modest deceleration from last year's 6% spike.
Even a slight downgrade to that forecast shouldn't worry investors, though, especially if P&G is still winning market share and trouncing its peers on metrics like profitability. Shareholder returns will also be supported by stock buyback spending and a dividend that's now in its 65th year of consecutive annual increases. The annual payout has jumped to $3.24 per share from $1.97 per share in just the last decade.
That stability is a big reason why dividend investors love P&G's stock, and it's not likely to be threatened by any operating challenges the company might describe this week.
