Barclays Downgrades Procter & Gamble

Investing.com — Barclays downgraded Procter & Gamble Company (NYSE:PG) from Overweight to Equal Weight on Monday due to concerns over the company’s growth trajectory in the next 12 months.

While P&G remains a best-in-class operator in the global consumer staples sector, its heavy exposure to slower-growing or declining markets, particularly China, has become a drag on its overall performance.

According to the report, though P&G’s growth in the U.S. stays strong—contributing to value and volume share gains—these gains are insufficient to offset struggles in other markets.

China, accounting for approximately 8-9% of P&G’s sales, is a significant concern. Despite government stimulus efforts, Barclays is skeptical about a quick recovery, forecasting a 4% decline in Chinese sales for 2025, compared to a previous estimate of 3%. Additionally, market softness in Asia Pacific and the Middle East is anticipated to persist.

Analysts also expressed concerns over P&G’s reliance on U.S. growth, which makes up nearly 50% of total sales.

“While P&G’s U.S. growth has held up well, other slower growth markets will continue to weigh on overall performance over the next 12 months,” they noted.

Barclays expects P&G’s organic sales growth to be approximately 3%, at the low end of its FY25 guidance, even with U.S. growth around 4%.

Barclays estimates P&G’s organic sales growth will drop to around 2.3% in the upcoming quarters, in contrast to the 4.3% average for its competitors.

In terms of valuation, Barclays points out that P&G is trading at a premium—roughly 17% above large-cap U.S. staples and 16% higher than the S&P 500. The firm believes this premium is no longer warranted given the company’s slowing growth outlook. Analysts reiterated their price target of $163, suggesting over 5% downside from current levels.