The Procter & Gamble Company (PG.US) Q1 results beat expectations across the board: organic sales grew 4%, and a rebound in volume reversed the growth structure.

On Thursday, October 22, before the U.S. market opened, The Procter & Gamble Company (PG.US) released its fiscal 2027 first-quarter earnings report. The report showed that the company's Q1 net sales were $23.3 billion, up 4% year over year, above the expected approximately $22.8 billion; core earnings per share were $2.00, up 1% year over year, above the expected $1.89. The company had previously guided that core EPS for the quarter would decline 5% or more year over year, but it actually rose instead of falling. Organic sales growth, the market's biggest focus, reached 4%, far exceeding the consensus estimate of about 2% (even UBS Group AG and Evercore ISI, the most optimistic among investment banks, forecast only 2.6%3%). The volume-price mix improved markedly: volume contributed 2.4%, product mix contributed 1.1%, and pricing contributed 0.4%, reversing the prior fiscal year's pattern of "growth driven entirely by foreign exchange and price increases, with zero volume contribution." Organic sales grew in all five segments: Beauty, Fabric & Home Care, and Grooming each grew about 5%, while Baby, Feminine & Family Care and Health Care each grew about 3%. Gross margin remained under pressure: core gross margin was 50.0%, down 150 basis points year over year, slightly weaker than the expected 50.3%. By attribution, higher commodity costs dragged by about 140 basis points and product reinvestment dragged by about 140 basis points, partially offset by 120 basis points of productivity savings and a decline in tariff costs; core operating margin fell 80 basis points to 25.9%, including 250 basis points of productivity savings. On the full-year guidance, the company kept organic sales growth of 1%3% and core EPS of $6.89$7.11 (flat to up 3% year over year) unchanged, in line with the market's expectation of "no substantive adjustment"; however, it raised its fiscal 2027 commodity cost headwind estimate from about $1 billion to about $1.4 billion (after tax), which, together with interest expense, lower non-operating income, and foreign exchange effects, would collectively drag on EPS growth by about 11%. Due to the completion of the acquisition of health supplements company Thorne on October 1, the company updated its all-in net sales growth guidance to 2%4%, and kept unchanged its plans for full-year free cash flow productivity of 85%90%, dividends of more than $10 billion, and share repurchases of about $5 billion. Chairman and Chief Executive Officer Shailesh Jejurikar said the strong start to the fiscal year keeps the company on track to achieve its full-year guidance ranges for organic growth, core EPS, and free cash flow productivity.