P&G's earnings forecast in spotlight as uncertainty plagues consumer spending
(Reuters) - Procter & Gamble's annual targets will be in focus when the consumer goods bellwether reports third-quarter results on Thursday, with some analysts expecting a forecast cut due to uncertainty around spending amid global trade tensions.
U.S. President Donald Trump's reciprocal tariffs on several trading partners have roiled global markets and raised fears of global retaliation, a potential trade war, renewed inflation and an eventual recession in the United States.
Consumer spending in several categories is expected to remain pressured this year, and for global consumer goods companies such as P&G the threat of even higher prices could affect demand.
Smaller rival Kimberly-Clark lowered its annual profit target on Tuesday and warned that tit-for-tat tariffs could drive up the Kleenex maker's input costs.
"The time has come for the majority of consumer staples companies to cut their earnings forecasts significantly ... investors are looking for visibility and can't find it in the most visible of sectors like consumer staples," RBC Capital Markets analyst Nik Modi said.
While consumer staples have typically performed well during times of economic and market turmoil, more-frequently occurring exogenous shocks were leading to volatility in companies' results and weakening performance consistency for consumer staples, Modi added.
In February, Procter & Gamble executives at an industry conference said the company was willing to adjust its short-term forecast as Trump's tariff policy created some pressure on moving raw materials and finished product across borders at a time when consumers were pulling back on spending.
"With trends moderating across the U.S. and Europe ... we think hitting organic revenue and EPS guidance (for P&G) will prove to be difficult," UBS analyst Peter Grom said last week.
The company in January maintained its fiscal 2025 forecasts of sales growth in the range of 2% to 4%, and annual core earnings between $6.91 and $7.05 per share.
Still, P&G's extensive portfolio of about 80 brands, as well as its recent efforts in introducing new products, such as the Tide Evo detergent, and offering smaller pack sizes, could help provide some protection from weak spending, analysts have said.
"Consumers may be quick to trade down on snacks or skip them altogether, but could be less likely to abandon grooming or personal care brands they've used for years," EMarketer analyst Blake Droesch said.
P&G's third-quarter revenue is expected to drop 0.4% to $20.11 billion, while its earnings per share is expected to rise marginally to $1.53, according to data compiled by LSEG.
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