Procter & Gamble delivered a stronger-than-expected fiscal third quarter, but the consumer goods giant issued a stark warning: the ongoing conflict in the Middle East is expected to cost the company roughly $1 billion after tax in fiscal year 2027, as soaring oil prices ripple through its global supply chain.
"The noise, I would call it, from the commodity exposure is significant — a billion dollars after tax is nothing to sneeze at from a headwind standpoint," CFO André Schulten said on the post-earnings analyst call. "We have a lot of work to do to work through the supply chain side and the cost side."
The warning came even as P&G posted results that comfortably beat Wall Street expectations, sending shares up more than 3% in Friday April 24th trading.
P&G reported net sales of $21.2 billion for the quarter ending March 31, 2026 — a 7% increase versus the prior year, well above the Street's $20.5 billion estimate. Core EPS came in at $1.59, up 3% year-over-year, beating the consensus of $1.56. Operating cash flow and net earnings both reached $4.0 billion, with adjusted free cash flow productivity at 82%.
Organic sales grew 3.4%, driven by 2% volume growth and approximately 1% from pricing — with the volume contribution coming in ahead of P&G's own internal expectations. All 10 product categories and all 7 geographic regions posted organic sales growth, a clean sweep that Schulten described as the defining characteristic of the quarter.
"The headline for us is exactly what we wanted — we are building momentum, and that momentum is very broad based," he said.
The Beauty segment was a standout, posting 7% organic sales growth led by strong innovation across hair care, skin care, and personal care — with super-premium brand SK-II delivering 18% growth in the quarter.
While the quarter's results were encouraging, P&G's forward-looking commentary was dominated by the escalating costs tied to the U.S.-Iran conflict. Oil prices have surged from around $60 per barrel before the conflict to approximately $100 today, directly raising costs for plastics, paper packaging, and transportation across P&G's global supply chain.
For the current fiscal year, the company flagged a $150 million after-tax impact landing almost entirely in the fourth quarter, stemming from commodity-linked cost inflation, feedstock exposures, and logistics disruptions. But the bigger concern is fiscal 2027: with P&G's new fiscal year beginning in July, Schulten estimated a roughly $1 billion after-tax headwind if oil remains near current levels. The petro-based inputs that feed P&G's manufacturing — naphtha, resins, non-wovens — are all affected, alongside sourcing changes, reformulation costs, and finished product logistics.
"Inflation across food, energy, healthcare, and many other areas of spending has taken a toll on consumers and how they assess value," Schulten said. "Recent geopolitical events have elevated this to a new level of concern."
To manage the disruption, P&G is leaning heavily on its Supply Chain 3.0 program — an advanced framework combining automation, real-time quality control, data analytics, and AI-driven reformulation capabilities.
Core operating margin fell 80 basis points versus the prior year, reflecting cost pressures and P&G's deliberate choice to keep reinvesting in innovation and brand support. P&G is generating approximately $2.2 billion in annual productivity savings, which are being cycled back into the business rather than flowing straight to the bottom line
Separate from the Middle East commodity pressures, P&G is navigating tariff costs estimated at approximately $400 million after tax for fiscal 2026, roughly half of which was tied to IEEPA tariffs invalidated by the U.S. Supreme Court in February. The company is now applying for refunds through the administration's process.
"We have about $150 million after tax in refunds available from the IEEPA tariff. How much of that is recoverable or not? We'll find out," Schulten said.
P&G held its full-year fiscal 2026 guidance steady: all-in sales growth of 1% to 5%, organic sales growth of flat to up 4%, and core EPS growth of 0% to 4%. However, with commodity costs, tariffs, interest, and taxes creating a combined headwind of approximately $0.25 per share — partially offset by a $200 million foreign exchange tailwind — management now expects results to land toward the lower end of those ranges.
"We continue to believe the best path to sustainable, balanced growth is by strengthening execution of our integrated growth strategy," Schulten said. "We are confident in the progress we're making and excited about the longer-term opportunity to create the CPG company of the future."
