Sales recovery is not yet translating into profit growth. I expect earnings to improve, but continued spending to defend market share and a large acquisition leave too little support for the stock’s premium.
Key points
- $135.24 a share is my October 2027 target, assuming a modest earnings recovery.
- 5% growth in fiscal 2028 adjusted earnings is my forecast, not a return to rapid expansion.
- $3.8 billion for the proposed supplement acquisition adds another demand on cash.
The call
The market is too optimistic about the recovery’s value. Today’s price requires 20.2 times my fiscal 2028 earnings forecast. At my chosen multiple, it instead requires $7.99 a share, a 16% increase from fiscal 2026. That needs stronger growth or more profitable growth than the current evidence supports.
Every business earned less despite higher sales ($ billions)- FY2025 reported
- FY2026 reported
Source: FY2026 Form 10-K, August 4, 2026; segment net earnings, fiscal years ended June 30.
Recovery should come, but defending sales remains expensive. Every business reported lower fiscal 2026 earnings despite higher sales. Management’s explanation for weak shipments does not resolve that profit squeeze. Innovation and restructuring should help, but promotions and brand spending will consume savings. Upcoming reports must establish that winning shoppers also improves profits.
Valuation
| Driver | My estimate |
|---|
| Fiscal 2027 adjusted earnings growth | 1% |
| Fiscal 2027 adjusted earnings per share | $6.96 |
| Fiscal 2028 adjusted earnings growth | 5% |
| Fiscal 2028 adjusted earnings per share | $7.31 |
| October 2027 forward earnings multiple | 18.5 times |
| Twelve-month price target | $135.24 |
Adjusted earnings exclude specified exceptional charges. My fiscal 2028 forecast combines 3% sales growth, a small improvement in profit per sales dollar and 1% fewer diluted shares; I assign no unverified acquisition benefit. The multiple retains a premium for dependable household demand, but demands a 5.4% earnings yield, meaning earnings divided by price; persistent premium valuation is the biggest threat to this sell.
Risks
- Recovery could accelerate: watch whether North American consumption gains become shipment growth without heavier discounts.
- Costs could ease faster: watch whether savings lift adjusted operating margins rather than fund additional spending.
- Investors could keep paying for safety: watch the earnings multiple, while checking acquisition financing and whether cash covers shareholder payments.
What would change my mind
Two consecutive reported quarters with at least 3% organic sales growth, excluding currency and acquisitions, and year-over-year adjusted operating-margin improvement would overturn my expectation that recovery remains expensive.