P&G grows sales about 2% with flat volumes while $1.4 billion of cost pressure caps profit. At 21 times earnings I see market-like returns and initiate with a hold.
Key points
- $1.4 billion headwind in fiscal 2027 from costs, currency, interest and other income caps core growth.
- 2% sales growth in fiscal 2027 at the midpoint of the 1% to 3% organic guide.
- $15.15 billion free cash flow in fiscal 2026 funds dividends and about $5 billion of buybacks in fiscal 2027.
The call
Market is about right on this slow grower. At $147.82 in October 2026 the stock trades at 21.1 times my $7.00 fiscal 2027 core profit per share.
Quarterly revenue stuck near $21-22 billionSEC filings via desk table and Rallies history, Oct 8 2026. E is my forecast.
I expect only market-like returns from here. Cost pressure offsets savings in fiscal 2027, then I see $7.35 profit per share in fiscal 2028 on recovery and buybacks.
Operating margin faded as reinvestment offset savingsSEC XBRL via desk fact table, eight quarters to Jun 2026, plus my FY27E view.
Valuation
| Driver | Figure |
|---|
| Fiscal 2027 sales growth | 2% in fiscal 2027 |
| Fiscal 2027 core profit | $7.00 per share in fiscal 2027 |
| Fiscal 2028 profit | $7.35 per share in fiscal 2028 |
| Target multiple | 20.4 times profit in fiscal 2028 |
| Target price | $149.94 per share by October 2027 |
A 20.4 times multiple fits 2% to 3% sales growth with steady returns. Cash yield of 4.2% in fiscal 2026 supports the payout. Upside to $165.56 for a buy looks too far.
Risks
- Input costs stay high in fiscal 2027 and margins slip further, which I would see in quarterly gross profit falling.
- North America volumes stay soft in fiscal 2027, which I would see in organic sales near 1% in fiscal 2027.
- The $3.8 billion Thorne deal in fiscal 2027 strains leverage, which I would see in borrowings above $34.14 billion in fiscal 2027.
What would change my mind
Faster volume and share gains with fading costs would lift my fiscal 2028 profit path.