Procter & Gamble nearing an "inflection point" on volume growth - Truist

Investing.com -- Procter&Gamble's (NYSE:PG) recent "encouraging" commentary around potential growth at its Chinese business could be a sign of overall volume recovery in the coming quarters at the consumer goods giant, according to analysts at Truist.

Rising inflation and elevated interest rates led many firms like P&G, which sells everything from diapers to toothpaste, to lift prices in order to counter increased freight costs. Although this helped to fuel revenues, demand from cost-conscious customers was dented.

"[T]he primary focus of 2023 for [consumer packaged goods] stocks was margin recovery as pricing actions finally offset supply chain/input costs that spiked during and after the pandemic," the Truists analysts said. "With minimal pricing expected in 2024, we believe investor focus has already turned to organic volume growth [...]."

The analysts added that they believe P&G will outperform its peers thanks to the expected improvement in volumes and a normalizing macroeconomic environment. In a note to clients, they raised their outlook for the company's stock to "Buy" from "Hold."

"We now believe the company is a quarter or two away from posting volume growth which, we believe, will serve as a catalyst for the stock," they said.

In particular, the Truist analysts pointed to optimism around P&G's operations in China, where consumer demand has been relatively soft during a sputtering post-pandemic rebound.

However, echoing comments from Chief Executive Jon Moeller earlier this year, they said this weakness may prove to be temporary due to an expanding Chinese middle class and steady demand for Western products.