Key Points

  • Procter & Gamble is one of the world's largest makers of consumer staples.

  • The company benefits from not making food, but it can't avoid cost-conscious consumers.

  • 10 stocks we like better than Procter & Gamble ›

Procter & Gamble (NYSE: PG) makes relatively inexpensive products that consumers buy regularly. Moreover, the products it sells, like toothpaste and toilet paper, are necessities. Overall, this consumer staples giant has a very reliable business. But it is still facing notable headwinds right now that could make the company's July 29 earnings release a relatively tough read. Here's what you need to know.

Procter & Gamble warned you ahead of time

When P&G reported fiscal third-quarter results roughly three months ago, its sales rose 7%, and its organic sales jumped 3%. Those are solid figures in the consumer staples space, a sector traditionally known for slow, steady growth. Management maintained its full-year guidance on both metrics, with overall sales expected to rise between 1% and 4%, and organic sales to be flat to up 4%.

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What was notable was CEO Shailesh Jejurikar's comment that the company was dealing with a "challenging geopolitical and economic environment." Regarding guidance, the consumer staples giant highlighted higher commodity costs and tariffs, as well as the impact of higher interest rates. While the company didn't change its earnings guidance range, it stated that "Given these factors, P&G now expects fiscal 2026 EPS results to be toward the lower-end of the guidance range."

P&G's stock price is down 7% over the past year, while the S&P 500 index (SNPINDEX: ^GSPC) is up 16%. That's notable underperformance. Investors are clearly worried that a strained consumer is pulling back. P&G's focus on consumer products like toothpaste saves it from having to deal with today's changing consumer food preferences, but it can't avoid the impact of budget tightening. In fact, P&G's products tend to be on the premium side, so it can be more exposed than many of its peers when consumers trade down to lower-priced offerings.

Not the end of the world for Procter & Gamble

Even if P&G's full-year 2026 results hit the low end of its guidance range, that is clearly not what Wall Street was hoping for at the start of the fiscal year. But investors are likely to focus more on the future than the past, examining fiscal 2027 guidance. Given the trends so far in fiscal 2026 and the market management overview provided in the fiscal third quarter, it seems likely that fiscal 2027 guidance will be conservative.

While conservative is clearly appropriate, it probably won't assuage Wall Street's concerns about the business. And that could lead to continued share price weakness. Investors may want to hold off on buying the stock until they read the full-year update and the outlook for fiscal 2027. That said, if you think long-term, this Dividend King (it has increased its dividend annually for nearly 70 years) consumer staples giant's 2.9% dividend yield is near its highest levels in the past five years. A further decline in the stock price would just make this reliable dividend stock more attractive for conservative, long-term income investors. Keep it on your wish list.

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Reuben Gregg Brewer has positions in Procter & Gamble. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.