Procter & Gamble (PG) will report Q2 (Dec) earnings tomorrow before the open. A conference call is scheduled for 8:30am ET.

The S&P CapitalIQ consensus is for earnings to remain nearly flat yr/yr at $1.65 per share and revs to grow 3% yr/yr to $20.34 bln.

PG reaffirmed its FY22 EPS guidance of +3-6% yr/yr, or $5.83-6.00, and revs of +2-4% yr/yr, or around $77.6-79.1 bln last quarter.

PG has typically beat earnings by low-to-mid single-digits for much of the past five years. The outlier was during the pandemic quarters, which saw a massive uptick in COVID-related purchases.

Inflation pressures have been rising steadily as of late so investors will want to pay attention to that. PG upped its FY22 commodity inflation headwind forecast to $2.1 bln in the prior quarter, from $1.8 bln. Including a $200 mln freight cost, the impact totals $2.3 bln, translating to an expected cut of $0.90 to its FY22 earnings.

PG is raising prices to help offset this impact. Investors will want to pay attention to how much elasticity they have in these price hikes.

TECHS:

PG has been a monster slow and steady winner. They have benefitted from investors flocking toward relatively safer companies as high-multiple tech names have fallen out of favor.

PG shares were up just 9.5% in 2021 through November, only to go on an additional 11% run to finish the year. However, in 2022, shares have cooled off some, falling about 4% to start the year.

PG currently trades at 26x FY22 earnings, a significant premium over competitors Johnson & Johnson (JNJ) at 16x and Kimberly Clark (KMB) at 14x. Lastly, PG's earnings report paints a good picture of what to expect from JNJ and KMB when each company reports earnings on January 25 and 26, respectively.

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