Procter and Gamble (NYSE:PG) stock tanked despite the consumer goods company reporting impressive Q2 earnings that topped estimates. The company has since boosted its 2021 profit forecast, as healthcare and home sales are expected to drive stronger than expected earnings growth.
Solid Q2
The consumer products’ company had an impressive second-quarter supported growth in both top-line bottom line and cash. The growth came as management executed strategies of superior productivity and constructive disruptions. The strategies allowed the company to build strong business momentum before the COVID-19 crisis accelerated progress in the calendar year.
Revenues in the quarter were up 8% to $19.7 billion, helped by an 8% increase in organic sales that benefited from increased shipment volume. Beauty segment organic sales were up 5% as Skin and Personal Care organic sales increased by mid-single digits attributed to innovation, increased pricing, and positive mix impact.
Procter Gamble posted earnings per share of $1.47 a share, up 4% versus the prior year. The increase was driven by an increase in net sales as well as an increase in operating margins. Gross Margin increased by 170 basis points to 53%. Gross Margins could have been higher as the company gaffed adverse impacts of foreign currency.
The company ended the quarter with cash and cash equivalent amounting to $11.9 billion with long-term debt of $22 billion. Cash flow from operating activities totaled $5.8 billion as adjusted free cash flow productivity stood at 113%.
Q3 Outlook
During the quarter Procter and Gamble returned $5 billion of cash to shareholders. The payout included $2 billion in dividend payouts and $3 billion, which were used to purchase the company’s common shares.
Buoyed by the solid Q2 results Procter and Gamble expects its Q3 sales to increase by between 5 and 6% compared to an initial estimate of 3% to 4% growth. Earnings per share are expected to increase by between 8 and 10% compared to an initial estimate of 5% to 8% growth.
The stock has come under immense pressure in recent days, having lost close to 8% in value. In 2020, the stock bounced from March lows rallying by more than 50% to record highs of $146.