Inflation and the Ukraine-Russia war could be bigger problems for Procter and Gamble than investors expect, according to JPMorgan. Analyst Andrea Teixeira downgraded Procter and Gamble to neutral from overweight in an effort to incorporate the likely impact the Russia-Ukraine war and rising inflation will have on the company's sales. "Because investors are used/expect to see PG beat and raise, which is harder now under the current cost and FX headwinds, we believe it is prudent to take a pause and wait until consensus incorporates a more realistic outlook," Teixeira wrote in a Wednesday note to clients. JPMorgan cut Procter and Gamble's price target to $165 from $181. The new price target is just 6% above where shares closed on Tuesday. For the past three and a half years, JPMorgan has been bullish on Procter and Gamble, saying its business is "sustainable" following increased market share gains over the past several years. Recent scanner data points also indicate that Procter and Gamble's U.S. business will continue to build despite rising prices, the note said. Still, the pressure from rising commodities prices, and less favorable foreign exchange rates, will "introduce incremental strain on gross margins over the balance of the year," analysts said. JPMorgan cut its earnings per share forecast for fiscal year 2022 to $5.84 from $5.93, less than consensus estimates, the note said. Shares for Procter and Gamble dipped 1.3% in Wednesday premarket trading. —CNBC's Michael Bloom contributed to this report.
Mario Anzuoni | Reuters
Inflation and the Ukraine-Russia war could be bigger problems for Procter and Gamble than investors expect, according to JPMorgan.