Procter & Gamble (PG) Implied Move Suggest Slight Upside Post Earnings

Market is expecting P&G, to post adjusted earnings of $1.70 a share on sales of $21.48 billion, according to FactSet. The company turned in earnings of $1.59 a share on sales of $20.77 billion in the year-ago quarter.

We might need to be cautious before PG fiscal second-quarter report, factors like China’s stumbling economy and spillover from the Israel-Hamas War might affect how the result would turn out.

PG has issued earnings guidance for FY 2024. EPS estimate in the range of 6.25 to 6.43, which would be a 7% increase from the prior year. Revenue Growth estimate in the range of 2.0% to 4.0%

PG last reported earnings 18 Oct 2023 before the market opened (BMO). PG shares gained +2.6% the day following the earnings announcement to close at 148.15. Following its earnings release, 96 days ago, PG stock has drifted -0.2% lower.

From the time it announced earnings, PG traded in a range between 141.61 and 152.67. The last price (147.86) is closer to the higher end of range.

Implied Straddle for upcoming earnings is estimated to be at 2.9%, based on the historical implied straddle, we could be looking at a positive price effect.

PG stock had mixed performance leading up to earnings. Shares of Procter & Gamble Company traded lower, on average, in the two weeks, two day, and one day periods heading into an earnings report. The best performance was one week ahead of earnings for an average gain of 0.5%

PG shares have moved higher in the immediate aftermath of earnings 8 out of 12 previous reports. On average the stock moved up 0.9% in the first day of trading after the company reported earnings.

Based on the previous 12 earnings releases, PG is more likely to trade higher 1 day after earnings for an average gain of 0.2%

PG share price has drifted down -0.4% post earnings announcement. Using the last 12 quarters data, the average drift between earnings announcements is 0.7%. The current drift represents a negative -0.1 standard deviation move.

Current post earnings announcement drift: -0.4%

Historical average post earnings announcement drift: 0.7%

Historical post earnings drift standard deviation move: ±7.5%

The options market overestimated PG stocks earnings move 58% of the time in the last 12 quarters. The predicted move after earnings announcement was ±2.8% on average vs an average of the actual earnings moves of 2.4% (in absolute terms).

PG's last earnings implied volatility (IV30) going into earnings was 20.2. The last time PG released earnings, the implied volatility dropped to 15.8, resulting in an implied vol crush of 22%. 5 days after earnings, the 30 day IV was 15.7.

Average Implied Volatility Crush For PG Earnings: 16%

Average 30 Day Implied Volatility 1 Day Before Earnings: 19.4

Average PG 30 Day IV for the Day of Earnings: 16.4

Average 30 Day Implied Volatility 5 Days After Earnings: 17.3

Based on the last 2 trading sessions implied move, traders and investors anticipate that the stock will experience a 0.2-0.4% price swing in either direction.

This suggest that there might be slight move post earnings.

PG earnings might be affected by weaker China recovery and some potential demand softness in smaller markets (such as Turkey and Saudi Arabia).

With the Middle East tensions, negative sentiment might affect demand for American brand. But PG might benefit from lower costs, a favorable product mix anda favorable pricing strategy.

Appreciate if you could share your thoughts in the comment section whether you think PG would be able to post a better-than-expected earnings and EPS, 2024 guidance might be adjusted to lower.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.