Procter & Gamble downgrade at Barclays on concerns over organic sales growth path

Investing.com -- Barclays downgraded Procter & Gamble Company (NYSE:PG ) from Overweight to Equal Weight on Monday amid concerns over the company's growth trajectory in the next 12 months.

While P&G remains a best-in-class operator in the global consumer staples sector, its heavy exposure to slower-growing or declining markets, particularly China, has become a drag on its overall performance.

According to the report, though P&G’s growth in the U.S. remains strong, contributing to value and volume share gains, these gains are insufficient to offset the struggles in other markets.

China, which accounts for approximately 8-9% of P&G’s sales, remains a particular concern. Despite government stimulus efforts, Barclays is skeptical about a quick recovery, forecasting a 4% decline in Chinese sales for 2025, versus 3% previously. Also, market softness in Asia Pacific and the Middle East is expected to persist.

Analysts also expressed concerns over P&G’s reliance on U.S. growth, which accounts for nearly 50% of its total sales.

"While P&G’s U.S. growth has held up well, other slower growth markets will continue to weigh on overall performance over the next 12 months," they noted.

“We expect P&G's organic sales growth to be ~3%, at the low end of its FY25 guidance, even with the US growing ~4%."

Barclays estimates that P&G’s organic sales growth will fall to around 2.3% in the coming quarters, compared to an average of 4.3% for its competitors.

In terms of valuation, Barclays notes that P&G is trading at a premium—currently around 17% above large-cap U.S. staples and 16% higher than the S&P 500 .

The firm believes this premium is no longer justified given the company’s slowing growth outlook. Analysts reiterated their price target of $163, over 5% downside from current levels.

Source: Investing.com