TD Cowen Signals Procter & Gamble Turnaround May Stretch Over the Next Two Years

New York — TD Cowen shifted its stance on The Procter & Gamble Company to “Hold” on January 27, trimming expectations for an early rebound in the consumer-goods giant’s performance despite marginally lifting the firm’s price target to $156 from $150. The investment bank now anticipates that P&G’s organic sales will advance only about 2 percent annually through fiscal 2027, a trajectory viewed as slower than many bullish investors had projected when they assumed growth had already bottomed out in the second quarter of fiscal 2025.

The revised outlook follows a mixed December-quarter report that underscored P&G’s uneven momentum across key markets. Net sales for the three months ended December 31 rose roughly 1 percent year over year to $22.21 billion, narrowly missing the $22.28 billion consensus compiled by LSEG. Adjusted earnings, however, outpaced Wall Street estimates, supported by resilient demand for higher-priced hair-care and beauty offerings.

TD Cowen’s analysts cited two primary constraints that could restrain top-line acceleration: limited scope for further price increases and continued budget pressure on Latino households in the United States. Both factors, the firm said, are likely to cap volume recovery even as year-earlier comparisons become more favorable. The posture contrasts with earlier market optimism that projected a steeper sales rebound once the company lapped the flat 0 percent organic growth recorded in the second quarter of fiscal 2025.

During the latest quarter, P&G’s U.S. business—its largest geographical segment—faced headwinds connected to the federal government shutdown in October and November. Temporary suspensions in food-assistance disbursements weighed on lower-income consumers already contending with elevated living costs and a tepid labor backdrop. Chief Financial Officer Andre Schulten noted in early December that sales fell across most domestic categories, with volumes in three of five major divisions registering declines. Beauty was the only segment to post an increase, highlighting ongoing consumer willingness to pay for perceived self-care essentials.

Overall U.S. volumes remained well below the company’s historical 3 percent to 4 percent growth range, intensifying scrutiny of whether demand can normalize swiftly once government functions stabilize. The effect of the shutdown on households reliant on nutrition programs is documented by the U.S. Department of Agriculture, which tracks distribution of Supplemental Nutrition Assistance Program benefits.

Gross profitability showed further erosion. Core gross margin contracted for a fifth consecutive quarter, pressured by tariffs on certain imported inputs and by the cost of offering a broader set of package sizes aimed at price-sensitive shoppers. Management has argued that the assortment strategy can defend market share but acknowledged it compresses margins until volumes scale. The margin squeeze has amplified investor focus on P&G’s ability to manage input inflation and logistical costs while defending shelf space against value-oriented competitors.

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TD Cowen’s more cautious stance does not negate strength in selective areas. International sales expanded at a mid-single-digit pace, benefiting from currency tailwinds and improving demand in emerging economies. Premium hair-care and skin-care lines, in particular, lifted the beauty segment, providing an offset to softer U.S. household-care and baby-care volumes. Still, analysts flagged that premiumization alone may be insufficient to restore the company’s historical mid-single-digit organic sales growth unless domestic volumes stabilize.

The price-target increase to $156 reflects modest multiple expansion assumptions rather than materially higher earnings forecasts. At the same time, the downgrade to “Hold” signals that upside could be limited until clearer evidence of volume traction emerges. According to TD Cowen, the shares already embed expectations for steady cost savings and incremental margin recovery, leaving less room for valuation re-rating if sales growth stays muted.

Market participants regard P&G as a bellwether for the broader consumer-staples sector. Its latest results, marked by a slight revenue miss coupled with stronger earnings, offered a nuanced picture of consumer health heading into 2026. Investors will monitor upcoming quarters for signs that U.S. consumption rebounds as federal operations fully resume and as the company’s pack-size initiatives gain wider adoption. Until then, TD Cowen believes the recovery path is likely to remain gradual rather than swift.

Crédito da imagem: Getty Images