Goldman Sachs analyst Bonnie Herzog lowered Procter & Gamble Company's (NYSE:PG) first-quarter estimates to reflect softer end markets.
Consequently, the analyst cut the price target to $164 (from $165), with a Neutral rating.
The analyst writes that while scanner trends show resilience for the company and continued growth in the U.S., challenges in international markets like the Middle East and China may offset this.
The analyst anticipates no recovery for SK-II until late 2024, when negative sentiment toward Japanese brands begins to ease.
Herzog is lowering first-quarter estimates, expecting organic sales growth of around 2%, which is expected to be mostly neutralized by FX translation headwinds, leading to flat net sales growth for the quarter.
Moreover, the analyst anticipates slight gross margin expansion supporting 4.7% year-over-year EPS growth to $1.91, down from $1.96 earlier.
The analyst says that due to challenges in Procter & Gamble's end markets and a slowdown to 2% growth in fourth-quarter, investor expectations have shifted to the lower end of PG's FY25 organic sales growth guidance of 3%-5% (vs. GS/consensus estimates of 3.5% and 3.6%).
Coupled with productivity gains, this should yield over 5% EPS CAGR from FY24 to FY27, slightly below the previous 6.5% CAGR, adds the analyst.
Overall, the analyst remains cautious about the stock, especially as PG's organic sales growth has decelerated over the past few quarters while trading at elevated multiples.
Investors can gain exposure to the stock via iShares U.S. Consumer Staples ETF (NYSE:IYK) and Vanguard Consumer Staples ETF (NYSE:VDC)
Price Action: PG shares are down 0.93% at $167.31 at the last check Monday.
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