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Proctor & Gamble (PG -6%) returned to positive volume growth for the first time in nearly two years in Q4 (Jun), even as prices continued to swell. However, foreign exchange headwinds engulfed the volume and price growth, resulting in roughly flat yr/yr revenue growth in the quarter, which moderately underperformed analyst expectations. Given how shares of the consumer staples giant closed at an all-time high yesterday, this blemish is weighing on the stock today.

Meanwhile, PG's initial FY25 guidance was relatively tame, projecting numbers consistent with analyst forecasts, including adjusted EPS of $6.91-7.05 and revenue growth of +2-4%. A notable standout was PG's organic sales growth projection of +3-5%. For several years before FY24, PG delivered organic sales growth of around +6-7%. Investors may have anticipated the underwhelming +4% organic growth in FY24 to be a one-off year following the numerous obstacles, like FX impacts and sticky inflation. However, PG's FY25 guidance reflects a possibly more lasting shift among consumers toward value-seeking, reducing their overall basket size in the process.

• In Q4, PG reported adjusted EPS of $1.40, edging past analyst estimates and snapping its string of double-digit beats. Top-line growth was virtually flat at $20.53 bln as FX impacts clipped 2 pts off net sales growth.
• Volumes expanded by 1% yr/yr, led by Grooming, Health Care, and Fabric & Home Care, all of which registered a 2% bump. Conversely, Beauty and Baby, Feminine & Family Care each endured a 1% volume decline. Geographically, nearly all markets outside China and the Middle East delivered solid volume growth, including a 4% jump in North America. PG continues to expect the recovery in China to be sluggish, with headwinds in the Middle East persisting.
• Still, despite the relative strength of many of PG's markets, the company expects the environment to remain volatile. Commodity costs and FX headwinds alone are estimated to trim $0.20, or 3 pts of growth, off PG's FY25 EPS guidance. Although, these headwinds mark a minor improvement over FY24. PG is not sitting idle, stating that it will double down on its productivity initiatives, including 'Supply Chain 3.0', to offset the macroeconomic issues standing in its way.

The market was waiting for PG's volumes to turn positive, especially given the favorable yr/yr comparisons over the past few quarters. While this finally materialized in Q4, it was accompanied by a few unpleasant surprises, including a mild revenue miss and disappointing organic growth guidance. Following highs for PG shares, these weak points were magnified, producing a sell-the-news reaction today.

That said, there is still plenty to like from PG. Its brands command exceptional loyalty, especially given their respective categories, which tend to see less trade-down as quality often trumps savings. At the same time, commodity cost headwinds are gradually easing, providing some breathing room regarding margins. PG also returns an attractive dollar amount to investors through a respectable 2.4% dividend yield and a repurchase plan translating to around 1% of its market cap. Therefore, major pullbacks present decent buying opportunities.