Procter & Gamble on Thursday reported quarterly revenue that fell short of estimates for the first time in five quarters, hurt by a stronger dollar and a struggling baby segment, which includes Pampers diapers.
But the consumer giant also raised its 2020 forecast and beat Wall Street's earnings estimates.
"We continue to face the challenges of a very volatile macro and geopolitical landscape and a competitive response to our growth, but all-in, we're continuing to make progress behind a set of integrated and mutually reinforcing strategies," Chief Financial and Operating Officer Jon Moeller told analysts.
Shares were trading up less than 1% in morning trading after initially falling as much as 2% before the market opened.
Here's what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
P&G reported fiscal second-quarter net income of $3.72 billion, or $1.41 per share, up from $3.19 billion, or $1.22 per share, a year earlier.
Excluding items, the consumer giant earned $1.42 per share, topping the $1.37 per share expected by analysts surveyed by Refinitiv.
Net sales rose 5% to $18.24 billion, falling short of expectations of $18.37 billion. Stripping out the impacts of foreign exchange, acquisitions and divestitures, organic sales increased 5%, helped by strong growth in its health care and beauty units.
Its health care business, which includes brands like Vicks and Oral B, saw organic sales growth of 7%, and its beauty business reported 8% organic sales growth, driven by double-digit growth in skin and personal care products, which include SK-II and Olay. P&G's fabric and home care business, which includes brands like Tide and Ariel, saw organic sales increase by 5% during the quarter.
Organic sales of P&G's baby care segment declined by low-single digits. The company attributed the decrease to competition, fewer customers buying baby products in certain markets and an inventory decrease in Japan, its third-largest market, due to an increase in the country's value-added tax.
Moeller told analysts that the decrease in Chinese birth rates has hit the overall baby care category. Rival Kimberly-Clark, which owns Huggies diapers, said Thursday that its overall volumes for baby and child care declined by mid-single digits during its fiscal fourth quarter.
China and the United States are P&G's two largest markets. Moeller said that the company will be monitoring the coronavirus spreading in China because it can also effect consumer confidence and travel.
"I have no idea what the investments are going to be relative to the new virus," he said on the conference call.
Organic sales of P&G's shaving segment, which includes Gillette and Venus, rebounded to low-single digit growth during the quarter, thanks to new products like the Gillette SkinGuard and price increases driven by currency changes that make imports more expensive.
In early January, the company announced plans to acquire Billie, a direct-to-consumer shaving company aimed at women.
"Clearly, they've created very effectively a fresh, new brand that extends across several categories, and they've done it, and we can benefit from their experience on this in a digital fashion with one-to-one mass marketing," Moeller said.
P&G now expects sales growth of 4% to 5% in fiscal 2020, up from its prior range of 3% to 5%. It also expects core earnings per share to increase to a range of 8% to 11%, up from its prior range of 5% to 10%.
The company expects to buy back more shares during fiscal 2020. It raised its repurchase range to $7 billion to $8 billion, up from $6 billion to $8 billion. During its second quarter, P&G bought back $3.5 billion of common stock.
Shares of P&G, which has a market value of $309 billion, have risen nearly 31% over the last year.
The stock of rival Kimberly-Clark, valued at $49.5 billion, is up 28% in the same time period. Shares of the Kleenex owner were unchanged in premarket trading after it topped analyst estimates for its quarterly earnings and revenue and raised its quarterly dividend from $1.03 to $1.07.