The Procter & Gamble Company (NYSE:PG) outperformed expectations on organic sales and margins in the first quarter of fiscal 2026 while keeping its full-year topline and EPS guidance unchanged.
Bank of America analysts led by Peter T. Galbo reiterated their Buy rating and raised the price forecast to $175 from $174, citing steady execution and innovation-led share gains despite near-term consumption moderation.
P&G's consumption trends softened through the quarter, slowing from about 2.4% to 1.8-1.9%, with near-term growth expected to be between 1.5% and 2%.
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P&G is responding to heightened competitive promotions by emphasizing innovation-led growth, rolling out new products such as Tide liquid and Tide EVO in laundry care and Pampers and Luvs in baby care.
Six of P&G's seven regions maintained or expanded market share, supported by a 7% gain in Latin America. Europe remained stable, while Asia Pacific and the Middle East saw slight declines. In Greater China, sales grew 5%, with momentum broadening beyond SK-II and strong double-digit gains in baby care.
Updated Tariff and Cost Expectations
Analysts highlighted that P&G now expects $500 million in tariff-related costs, down from $750 million previously and $1 billion at fiscal fourth-quarter earnings, due to certain material exclusions like Brazilian eucalyptus pulp, adjusted sourcing and potential further upside (India/Metamucil).
Second Half Growth Rebound Anticipated
The brokerage noted that second quarter 2026 is likely to mark the softest growth period of the year, given tough comparisons with last year's port strikes that notably affected Family Care. However, management anticipates a rebound in the second half, supported by ongoing innovation, restructuring benefits, and improving supply chain.
Despite competitors' heightened promotional activity in select categories, P&G is expected to stay disciplined in pursuing quality-led growth.
The analyst noted that the company's superiority model remains resilient as tariff and supply headwinds subside.
Revised Financial Estimates and Valuation
Bank of America slightly raised its EPS estimates for 2026, 2027 and 2028 to $7.00, $7.35 and $7.75, respectively, from $6.94, $7.30 and $7.70 earlier, reflecting the flow-through of the first-quarter beat but partially offset by softer second-quarter assumptions.
The brokerage now forecasts second-quarter organic sales growth of 0.5% versus a prior estimate of 1.5%, and 2026 organic growth of 1.6%, down from a previous forecast of 2%. Gross margin for the second quarter is expected to contract by 50 basis points, with EPS of $1.87, down from $1.91 earlier.
Revenue is forecast to rise to $86.73 billion in 2026, and for 2027, Bank of America expects sales to edge up further to $88.25 billion, followed by $89.81 billion in 2028.
Bank of America's Buy rating on P&G and price forecast of $175, based on a 24.5x CY26E P/E multiple.
The brokerage said the 20% valuation premium for household and personal care peers reflects P&G's long-term growth potential, despite short-term tariff and restructuring pressures.
Price Action: PG shares were trading lower by 0.80% to $151.27 at last check Monday.
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