Procter & Gamble Downgraded by Barclays Due to Concerns Over Organic Sales Growth Path

Barclays has downgraded Procter & Gamble Company from Overweight to Equal Weight amid concerns regarding the company’s growth trajectory over the next year. While P&G is recognized as a leading operator in the global consumer staples sector, its significant exposure to slower-growing or declining markets, particularly China, is impacting its overall performance.

Despite strong growth in the U.S., which has led to gains in both value and volume share, these improvements are not enough to counterbalance challenges in other regions. China, representing around 8-9% of P&G’s sales, remains a focal point of concern. Barclays is skeptical about a swift recovery in the Chinese market, projecting a 4% decline in sales for 2025, an adjustment from a previous estimate of 3%. Additionally, market softness is expected to persist in the Asia Pacific and Middle East regions.

Analysts have also raised alarms over P&G’s reliance on U.S. growth, which constitutes nearly half of its total sales. They stated, “While P&G’s U.S. growth has held up well, other slower growth markets will continue to weigh on overall performance over the next 12 months.” They anticipate organic sales growth for P&G to be approximately 3%, at the lower end of its fiscal year 2025 guidance, even with the U.S. market expected to grow around 4%.

Barclays estimates that P&G’s organic sales growth will decline to about 2.3% in the upcoming quarters, compared to an average of 4.3% for its competitors. In terms of valuation, Barclays highlights that P&G is currently trading at a premium—around 17% above other large-cap U.S. staples and 16% higher than the broader market. The firm believes this premium is no longer warranted in light of the company’s slowing growth outlook and has reiterated a price target of $163, suggesting over 5% downside potential from current levels.