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On Thursday, Redburn-Atlantic revised its stance on Procter & Gamble (NYSE:PG) shares, downgrading the consumer goods giant from Buy to Neutral and reducing the price target to $161 from the previous $176. Edward Lewis (JO:LEWJ), an analyst at Redburn-Atlantic, noted that P&G’s growth is decelerating, largely due to market dynamics, after a successful seven-year run of outpacing its peers in organic sales growth and earnings per share (EPS).
Lewis highlighted that while P&G will continue to be a defensive stock with strong market positions, a proven productivity track record, and a robust balance sheet, the potential for significant stock appreciation appears constrained. The new price target of $161, based on a discounted cash flow (DCF) analysis, reflects the equity’s recent pullback following the company’s third-quarter 2025 financial results.
The revised DCF valuation assumes a weighted average cost of capital (WACC) of 7.5%, organic sales growth of around 4% per annum, an operating margin of 28%, and a return on invested capital (ROIC) of 27.8% by the tenth year, with long-term growth stabilized at 3.0%. These projections translate to a forward price-to-earnings (P/E) ratio of 22, including restructuring costs, which is about a 10% premium over the long-term average.
According to Lewis, considering the approximately 2% dividend yield, the anticipated 12-month total shareholder return stands at 3%. This modest projection is part of the rationale behind the downgrade to Neutral, as the stock’s upside potential seems limited in the analyst’s view. The market will continue to monitor P&G’s performance closely, especially in light of the changing market conditions that have impacted the company’s growth trajectory.
In other recent news, Procter & Gamble (P&G) reported its fiscal Q3 2025 earnings, revealing an earnings per share (EPS) of $1.54, slightly below the projected $1.55. The company also reported revenue of $19.78 billion, which fell short of the expected $20.36 billion, leading to a noticeable market reaction. Despite these results, P&G demonstrated a 1% increase in organic sales and returned $3.8 billion to shareholders, indicating strong cash flow management. Looking ahead, P&G forecasts a 2% organic sales growth and a core EPS growth of 2-4% for fiscal 2025.
In other developments, RBC Capital Markets upgraded P&G’s stock rating to Outperform from Sector Perform, with a new price target of $177, reflecting confidence in the company’s strategic direction. The analyst highlighted P&G’s strengths in innovation and supply chain flexibility as vital in navigating current market challenges. This upgrade suggests a positive outlook for P&G amidst a challenging market environment. Additionally, P&G plans to return $16-17 billion to shareholders, signaling confidence in its long-term strategy.
The company faces potential headwinds from commodity costs and tariffs, which could impact margins. However, P&G remains committed to innovation and operational efficiency, aiming to maintain its competitive edge. Analysts and investors will continue to monitor P&G’s strategic initiatives and market performance closely.
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