Sign Up

Options Corner: Procter & Gamble's Tariff Blues Could Signal A Discounted Opportunity

Even with a strong earnings report, concerns over the economic impact of the Trump administration's tariffs continue to impose an overhang over publicly traded enterprises. Consumer goods giant The Procter & Gamble Company (NYSE:PG) found that out the hard way. Although the company managed to beat analysts' expectations, management disclosed its anticipated financial impact from the levies. While the announcement sent PG stock down on Tuesday, the red ink could be a discount.

On paper, circumstances appeared auspicious. The manufacturer of popular brands such as Gillette, Tide, Pampers and Crest reported fiscal fourth-quarter adjusted earnings per share of $1.48, beating analysts' consensus estimate of $1.42. On the top line, P&G generated sales of $20.889 billion, representing a 2% lift on a year-over-year basis and exceeding Wall Street's view of $20.765 billion.

In addition, organic sales grew across all segments. In particular, Beauty, Grooming, Fabric & Home Care, and Baby, Feminine & Family Care each increased by 1% and Health Care rose by 2% against the year-ago period. It's also worth pointing out that operating margin jumped 190 basis points to 20.8% in the fourth quarter.

Despite the positive print, P&G couldn't escape from the Trump tariff drama. For fiscal 2026, management guided adjusted EPS to a range between $6.83 and $7.09. However, analysts pegged a consensus view of $6.99. With the market not a fan of uncertainty, PG stock dropped following the earnings results.

What appears to be the most troublesome component is that P&G's outlook includes around $1 billion before-tax, or approximately $800 million after-tax, in higher costs from tariffs. Still, that might not be enough reason to give up on PG stock.

During a media call, CFO Andre Schulten admitted that some of the costs will be passed onto the consumer in the form of price hikes. But Schulten also stated that most of the tariff hit could be offset through productivity or sourcing changes. Given that the company delivered an earnings beat despite challenges, the performance lends credibility to the statement.

Also, while ...