Procter & Gamble (PG) surged 5.6% on Thursday, marking its best single-day performance in more than six years. As many consumers grapple with inflation and the high cost of living, the household products giant reported unexpectedly strong first-quarter results, with organic sales rising 4%, a significant rebound from the flat performance in the previous quarter. This also explains why the stock posted its best single-day gain since the market began surging after the pandemic crash in March 2020. Organic volume grew 2.4%, with strong performance across beauty, fabric and home care businesses. Total revenue rose 4% to $23.3 billion, exceeding market expectations of $22.8 billion.
Despite strong organic sales growth, core gross margin still declined 150 basis points, mainly due to rising commodity costs, reflecting higher oil prices compared with the same period last year. However, productivity savings programs helped improve the selling, general and administrative expense ratio, while operating margin fell 70 basis points to 25.5%. On the bottom line, core earnings per share came in at $2.00, up from $1.99 in the same period last year and above the market consensus of $1.89.
P&G maintained its full-year core earnings per share guidance in the range of $6.89 to $7.11 and expects headwinds from commodity costs and oil prices to intensify over the remainder of the year. Nevertheless, the company appears to have reversed earlier concerns about slowing growth, and it did so at a time when many consumer brands are struggling. For any mature consumer staples company, 4% organic growth is impressive, and this is the number investors should focus on. The news came on the same day that technology stocks plunged, and the selloff may attract more investors to rotate into P&G, which is regarded as one of the most stable defensive stocks in the market.
P&G is one of the world’s largest consumer staples companies and has raised its dividend annually for 70 consecutive years, making it a “Dividend King”—a company that has increased its payout for at least 50 consecutive years. Its current forward yield is 2.6%, which may not look impressive compared with the 5% yield on 10-year U.S. Treasury bonds, but over the past 10 years, P&G’s total return with dividends reinvested has been nearly 150%; over the past 30 years, total return has reached 1,310%.
However, P&G’s free cash flow for fiscal 2026 still grew 8% to $15.1 billion, easily covering $10.2 billion in dividend payments. The company also spent $5 billion on share buybacks during the year, returning more than 100% of free cash flow to investors. For fiscal 2027, P&G expects organic sales growth of 1% to 3% and core earnings per share growth of 0% to 3%, and plans to pay more than $10 billion in dividends and allocate another $5 billion to buybacks. This stabilizing trend should be driven by further price increases, premiumization of classic brands (Pampers, Pantene, Tide and Gain) and growth in China and Latin American markets. At $160, P&G trades at 23 times the midpoint of its fiscal 2027 core earnings per share forecast, slightly high relative to its growth potential, but this premium valuation may hold as long as rising interest rates and yields push investors toward defensive stocks. The stock should also easily recover from the next market crash.
P&G’s latest quarterly results beat expectations, with 4% organic sales growth reversing the previous slowdown, and the stock posted its best single-day performance in six years, highlighting its defensive qualities amid market turmoil. The company has raised its dividend for 70 consecutive years, has strong free cash flow, has streamlined its brand portfolio to focus on high-growth businesses, and plans to continue rewarding shareholders through dividends and buybacks. Although headwinds from commodity costs and oil prices are expected to intensify during the year, and the valuation is slightly high relative to growth potential, P&G remains a solid choice for investors seeking defensive, dividend-paying stocks or looking to avoid volatility in the AI sector.
