Procter & Gamble: Margins Rise Amidst Sales Struggles

We update coverage of PG with a Hold and $180 PT. Procter & Gamble is a global leader in branded

consumer staples, from beauty & grooming to health care, fabric & home care, and everyday family care not only found on shelves but also in homes of 180+ countries. Underneath its blue-chip facade, however, lurks a subtle yet intricate dance between commendable cost discipline and flagging top-line momentum. Despite mgmt's $1.5B COGS savings providing a buffer against tariff/commodity HTs, underlying organic sales growth is poised to hit the lower end of expectations (~2.3%). Far harder than the current 2%+ Street comp implies if we're being realistic. Further, nearly all of the FY25 diluted EPS lift to $6.65 (up 10.5% y/y but trailing Street by ~2%) comes from leveraging efficiencies & buyback, not the top line. All of which earns our reluctant hold rating: As margins edge higher and mgmt leans into shareholder returns, our 25.5x PE multiple for FY26E—just below recent norms to account for lingering tariff and FX drags as well as notable insider selling—anchors valuation squarely in fair value territory. The result, a $180 PT (13% upside from here), acknowledges the durable earnings arc but the risk that top-line fragility or cost shocks will sap near-term conviction.

## Top-line Uncertainty Remains a Key Risk
We view robust productivity execution as the underpinning of margin resilience in a tough cost

reset, especially as management has line-of-sight to $1.5bn of cost of goods sold savings ($2bn