Redburn Atlantic has downgraded Procter & Gamble from Buy to Neutral, assigning a revised price target of $161. This shift reflects concerns around the company’s limited room for upward movement and ongoing pressure on operating margins, despite its strong brand portfolio and global presence.
📊 The downgrade follows a recent earnings report that slightly missed expectations. P&G reported EPS of $1.54, just under estimates, with revenue landing at $19.78 billion—shy of the anticipated $20.36 billion. Organic sales grew by only 1%, and rising input costs paired with unfavorable foreign exchange movements have started to squeeze margins.
📉 Redburn’s new valuation model incorporates a WACC of 7.5%, annual organic sales growth of 4%, and an operating margin projection of 28%. This places the stock at a forward P/E of 22, which still trades at a premium to historical norms. Factoring in the 2% dividend yield, the estimated total return over the next 12 months is just 3%—a key reason for the shift to a more neutral stance.
💵 On the dividend front, P&G remains consistent and reliable. The company recently increased its quarterly dividend by 7%, lifting the payout to $1.0065 per share. This brings the annual dividend to $4.026, offering a forward yield of 2.6%. With a payout ratio around 65%, the dividend is both attractive and sustainable, making the stock appealing to income-oriented investors even as growth moderates.
🔮 While the dividend remains a strong point, the company’s muted growth trajectory and valuation premium suggest limited near-term upside. Investors may want to hold rather than accumulate at current levels as P&G works to manage margin pressures and reignite top-line growth.