P&G oil cost headwind reaches $1.4 billion even as shares jump

The P&G oil cost headwind is getting bigger. Procter & Gamble said on Thursday, Oct. 22, that it now expects higher raw material, energy and transport costs to cut about $1.4 billion after tax from its fiscal 2027 results, assuming Brent crude at $100 a barrel. Its shares still rose more than 5% in morning trading after a quarter that beat estimates, CNBC reported.

What happened

Net sales for the three months to Sept. 30 rose 4% to $23.3 billion, and organic sales also grew 4%, helped by a 2% rise in volume and a 1% lift from mix. Core earnings were $2.00 a share, up 1% and ahead of the $1.88 analysts expected, according to LSEG data cited by CNBC. Diluted earnings were $1.97 a share.

Fabric and home care led, with organic sales up 5% and volume up 4.3% on demand for laundry detergent. Health care volume fell 2.9%, CNBC said, as demand for oral care and some over-the-counter items shrank. The company returned $3.9 billion to shareholders through dividends and buybacks.

Every segment grew organic sales. Beauty and grooming each rose 5%, fabric and home care 5%, health care 3% and baby, feminine and family care 3%, the company said. Operating cash flow was $5.8 billion.

Margins showed the strain. Core gross margin fell 150 basis points, with 140 points coming from higher commodity costs, the company said.

Why it matters

Combined with higher interest costs, lower non-operating income and currency effects, P&G puts the total drag at $0.79 a share, or 11 points of core EPS growth. It kept guidance for core EPS growth of 0% to 3%, or $6.89 to $7.11 a share, and organic sales growth of 1% to 3%. All-in sales growth is now seen at 2% to 4% after the Thorne supplements deal closed on Oct. 1.

Finance chief Andre Schulten said on the earnings call that the first quarter caught only part of the cost increase. "Due to the duration of higher oil prices, we now expect materially higher cost headwinds in Q2 and the second half of fiscal 2027," he said, adding that oil near $113 means more pressure in the third and fourth quarters. Brent settled at $113.17 on Thursday.

That is the P&G oil cost headwind in plain terms: the guidance assumes $100 oil while the market trades above it. Energy has been rising since the Gulf attacks we covered in Houthi strikes on Saudi oil and the Brent move above $110.

What's next

Schulten also gave a sense of timing. The first quarter carried about a 5% earnings headwind from costs, against roughly 8% expected for the full year at $100 oil. Products for the second quarter have already been made at around $100 a barrel, he said, leaving less room to react than in the second half.

Schulten described a split consumer: wealthier shoppers will trade up to a $30 shampoo, while lower-income households stretch brands such as Tide and Pampers. "In aggregate, the consumer is resilient," he told analysts, according to PYMNTS, but P&G will watch demand as fuel costs stay high into winter.

The full release, including segment detail, is on P&G's newsroom. For now, investors chose stable volumes over the cost warning, but a lasting P&G oil cost headwind will test pricing power in the second half.