Consumer products behemoth Proctor & Gamble (NYSE:PG) missed analysts' expectations in Q1 CY2024, with revenue flat year on year at $20.2 billion. It made a non-GAAP profit of $1.52 per share, improving from its profit of $1.37 per share in the same quarter last year.

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“We delivered solid sales and strong earnings growth in the third quarter despite multiple headwinds, enabling us to raise our EPS growth guidance and maintain our top-line outlook for the fiscal year,” said Jon Moeller, Chairman of the Board, President and Chief Executive Officer.

Founded by candle maker William Procter and soap maker James Gamble, Proctor & Gamble (NYSE:PG) is a consumer products behemoth whose product portfolio spans everything from facial tissues to laundry detergent to feminine care to men’s grooming.

Household Products

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Sales Growth

Procter & Gamble is one of the most widely recognized consumer staples companies in the world. Its influence over consumers gives it extremely high negotiating leverage with distributors, enabling it to pick and choose where it sells its products (a luxury many don't have).

As you can see below, the company's annualized revenue growth rate of 3.9% over the last three years was weak as consumers bought less of its products. We'll explore what this means in the "Volume Growth" section.

This quarter, Procter & Gamble's revenue grew 0.6% year on year to $20.2 billion, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 3.2% over the next 12 months, an acceleration from this quarter.

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Volume Growth

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

To analyze whether Procter & Gamble generated its growth from changes in price or volume, we can compare its volume growth to its organic revenue growth, which excludes non-fundamental impacts on company financials like mergers and currency fluctuations.

Over the last two years, Procter & Gamble's average quarterly sales volumes have shrunk by 2%. This decrease isn't ideal as the quantity demanded for consumer staples products is typically stable. Luckily, Procter & Gamble was able to offset fewer customers purchasing its products by charging higher prices, enabling it to generate 6.1% average organic revenue growth. We hope the company can grow its volumes soon, however, as consistent price increases (on top of inflation) aren't sustainable over the long term unless the business is really really special.

In Procter & Gamble's Q1 2024, year on year sales volumes were flat. This result was a well-appreciated turnaround from the 3% year-on-year decline it posted 12 months ago, showing the company is heading in the right direction.

Key Takeaways from Procter & Gamble's Q1 Results

Revenue unfortunately missed analysts' expectations on organic revenue that came in below Wall Street Consensus estimates. On the other hand, the company did beat EPS slightly and raised its full year EPS guidance to a level above expectations. Zooming out, we think this was still a decent, albeit mixed, quarter, showing that the company is staying on track. The stock is flat after reporting and currently trades at $157.2 per share.

So should you invest in Procter & Gamble right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.