Margin Mania Boosts P&G: Analyst Ups The Ante On Target, Foresees Continued Investments Payoff

Raymond James analyst Olivia Tong reiterated an Outperform rating on the shares of Procter & Gamble Company PG, raising the price target to $175 from $170.
The analyst expects the company's spread between price and volume to narrow while margin momentum should continue into FY24. PG reported Street-beating 3Q23 results. Gross profit increased 7% Y/Y to $9.66 billion. The reported gross margin increased by 150 basis points to 48.2%.
Raymond James raised FY23/24 EPS estimates to $5.87/6.33 from $5.85/6.30, as the company is expected to benefit from continued investment to support long-term improvement.
For FY24, Olivia forecasts 4% organic sales growth, gross and operating margin expansion in all four quarters, and EPS of $6.33 for 8% y/y growth.
As supply chain constraints ease and productivity begins to ramp (3Q +210 bp y/y), management expects $200 million in commodity pressure and flat freight costs but foreign exchange pressure of $100 million on an after-tax basis, the analyst notes.
For Q4, the analyst expects organic sales growth of 5% y/y (+6% price, +1% mix, -2% volume), ending the year at 6%, in line with the raised guide. EPS is expected to be $1.34 for Q4 and $5.87 for FY23.
Price Action: PG shares are trading lower by 0.05% at $155.99 on the last check Monday.
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