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Procter & Gamble (PG) is modestly higher after reporting its Q2 (Dec) results this morning. The packaged goods giant delivered a slight EPS beat, while revenue increased 1.5% yr/yr to $22.2 bln, in line with expectations. PG reiterated this was likely the softest quarter of the year, as a challenging consumer and competitive backdrop met a tough U.S. comparison tied to last year's port-strike and pantry-loading dynamics.

• Organic sales were flat yr/yr, as a 1% increase in pricing was offset by a 1% decline in volume, with mix flat. Importantly, the base-period distortions were largely concentrated in the U.S.; excluding the U.S., the rest of the business delivered nearly 3% organic growth, with most regions outside the U.S. either growing or accelerating during the quarter.
• Seven of ten product categories held or grew organic sales, led by mid-single-digit growth in Hair Care and low-single-digit gains in Skin & Personal Care, Personal Health Care, Home Care, and Oral Care, while Baby Care and Feminine Care slipped low single digits and Family Care was pressured, down about 10%.
• North America organic sales were down 2% with a 3% decline in volume, while international had relative bright spots, including Europe up 1%, Greater China up 3%, and Latin America up 8% organically.
• Softer consumer markets, aggressive competition, and tariff and geopolitical uncertainty drove continued reinvestment behind innovation and demand creation. Reported gross margin fell 120 bps yr/yr and core gross margin declined 50 bps, with productivity and pricing outweighed by unfavorable mix, reinvestment, and higher tariff-related costs.
• Looking ahead, PG reaffirmed FY26 guidance for core EPS growth of 0-4% and revenue growth of 1-5% and maintained its view that results should strengthen in the back half as innovation ramps and the prior-year base effects roll off.

Briefing.com Analyst Insight

This quarter carried extra noise as the prior-year period benefited from port-strike and hurricane-related pantry loading and trade dynamics, particularly in the U.S. Still, results outside the impacted areas held up well, with stronger organic growth outside the U.S. and most international regions growing or accelerating during the quarter. The volume decline is worth monitoring for what it says about underlying demand, although it also fits with management's view that this would be the softest quarter of the year. With that quarter now in the rearview mirror, the focus turns to whether the back-half recovery can take hold as innovation and in-market interventions ramp. We view this as more of a show-me story from here, with investors looking for newer product and brand initiatives to offset a still-challenging consumer, competitive, and tariff backdrop. The reaffirmed guidance is encouraging, and today's reaction suggests the market is increasingly positioned for PG to deliver on the back-half setup.