P&G Beats Estimates with Strong Beauty Demand, Warns of Rising Input Costs

• P&G's quarterly sales rose 7% to $21.24 billion, beating estimates of $20.50 billion, with organic volume up 2% led by 5% growth in the beauty segment
• Rising oil prices from $60 to $100 per barrel due to Middle East conflict will impact plastics, paper packaging, and transportation costs by $150 million, with greater impact expected in fiscal 2027 if conflict continues
• Currency-neutral gross margin fell 100 basis points for the sixth straight quarter, with the company facing nearly $400 million in tariff impacts and seeking refunds for half that amount from invalidated tariffs

P&G Beats Estimates Despite Rising Costs and Margin Pressure

Key Financial Performance:

Procter & Gamble exceeded Q3 expectations with sales rising 7% year-over-year to $21.24 billion, surpassing analyst estimates of $20.50 billion. Adjusted earnings per share also beat forecasts. However, gross margins fell 100 basis points, marking the sixth consecutive quarterly decline.

Cost Pressures and Guidance:

P&G warned of a $150 million hit to fiscal 2026 annual profits due to rising input costs stemming from the Middle East conflict. Oil prices have surged from $60 to approximately $100 per barrel, impacting plastics, paper packaging, and transportation costs. The company indicated impacts could intensify in fiscal Q1 2027 if the conflict persists.

The company maintains expectations for a $400 million tariff impact on fiscal 2026 earnings and plans to seek refunds for tariffs invalidated by the Supreme Court in February, though timing remains uncertain. P&G now expects EPS at the lower end of its forecast range due to these headwinds.

Growth Drivers:

Volume growth of 2% was led by the beauty segment, which surged 5%, driven by premium hair care and skincare products including Pantene shampoo and Olay cream. Volumes increased in three of five reported segments, with total prices rising 1%. New product launches at higher price points resonated with wealthier consumers in North America and Europe, though lower-income households showed trading-down behavior.

Market Context:

P&G's performance aligns with rival L'Oreal's strong premium product demand, while Beiersdorf warned of potential price increases if commodity costs continue rising. CEO Shailesh Jejurikar emphasized continued investment in product innovation despite challenging macroeconomic conditions.