Although Procter & Gamble Co (NYSE:PG) exceeded expectations by reporting more than 10% organic sales growth for the first quarter, the company’s margins contracted, according to BofA Securities.

The Procter & Gamble Analyst: Bryan Spillane maintained a Buy rating on Procter & Gamble, while keeping the price target unchanged at $180.

The Procter & Gamble Thesis: The company’s organic sales growth was driven by pricing and its gross margins shrank by 400 basis points to 46.7%, much below Street expectations, Spillane said in the note.

Also Read: Procter & Gamble's Ex-Dividend Date Is Thursday, Here's What You Need To Know

Operating leverage from Procter & Gamble’s sales beat “helped generate 3c of the $1.33 EPS vs BofAe [estimate] at $1.26 (Street: $1.29e), with an additional 1c of benefit each from Non-Operating expenses and Non-controlling interests and lower tax adding 2c,” he noted.

“Overall, this quarter follows the recent topline beat/margin miss dynamic surrounding staples, with more margin pressure expected in 4Q as evidenced by raised sales but unchanged EPS guide,” the analyst wrote.

PG Price Action: Shares of Procter & Gamble had risen by 2.46% to $163.54 at the time of publication Wednesday, according to Benzinga Pro.