Procter & Gamble

P&G’s moat is anchored in intangible assets and scale economics across five sector business units and a concentrated set of daily-use brands (Tide, Pampers, Gillette, Oral-B, Head & Shoulders, Charmin, Crest, etc.).

Intangible assets: 95/100. The company spends about 2.1 billion dollars on R&D and significant brand-building within SG&A to maintain superiority across product, packaging, communication, retail execution, and value. The breadth and depth of trademarks and patents protect product formulations and manufacturing processes.

Cost advantages: 90/100. Global procurement, manufacturing productivity, and logistics scale deliver lower unit costs and support category leadership; FY25 operating margin was 24.3 percent and gross margin 51.2 percent despite mix and commodity pressures.

Efficient scale: 75/100. Many categories approach oligopolistic structures where incremental entry by smaller rivals is deterred by advertising and shelf-space intensity. Switching costs: 60/100. Consumers can switch, but brand trust, performance differentiation, and habit create meaningful inertia in baby care, fabric care, and oral care.

Network effects: 5/100. Not material. Risk appraisal: private label and DTC disruptors remain a check, evidenced by the prior Gillette intangible impairment in FY24; however, continued premiumization and innovation, plus superior in-store execution and e-commerce reach, underpin moat durability.

Recent years show clear evidence of pricing power and mix: FY24 organic sales rose 4 percent primarily from price, and in FY25, organic sales increased 2 percent with price and mix each adding roughly a point, while FY26 Q1 organic grew 2 percent. This reflects the ability to sustain pricing without material volume losses in many categories.

However, price sensitivity is higher in tissue/towels and some baby care lines, and retailer private labels remain a restraint. FY25 gross margin included a 30 bps headwind from higher commodities and 10 bps from tariffs, indicating that productivity and mix offset a good part of input inflation.

Looking forward, tariff costs in FY26 are a headwind (management has referenced a several-hundred-million-dollar pre-tax impact), but P&G has multiple levers: product superiority, premium tiers, pack-price architectures, and ongoing productivity.

The portfolio is heavily weighted to non-discretionary daily-use categories with recurring purchase behavior, producing stable revenue, earnings, and cash flows across cycles.

FY25 delivered core EPS growth and higher operating margins despite FX and category mix, while FY26 Q1 showed continued organic growth and 102 percent adjusted FCF productivity. Geographic and customer diversification are robust, though Walmart accounts for about 16 percent of sales and the top 10 customers are 43 percent.

Currency and emerging-market volatility are ongoing variables, but risk is moderated by global footprint and disciplined category focus. Management continues to frame a mid-single-digit organic growth and strong FCF productivity algorithm, which has proven reliable over many years.

Balance sheet strength is high with AA−/Aa3 long-term ratings and abundant liquidity. As of June 30, 2025, total debt was about 34.9 billion dollars and cash was 9.6 billion; by September 30, 2025, cash rose to 11.2 billion and total debt (current plus long-term) approximated 36.0 billion.

Against TTM adjusted FCF of about 15.6 billion dollars, net debt sits near 1.6 times FCF, conservative for a stable consumer franchise. Commercial paper backstops are ample and undrawn. Strong FCF comfortably funds the dividend and buybacks while preserving flexibility for reinvestment.

Capital allocation is disciplined: P&G prioritizes reinvestment in product superiority and productivity, then returns excess cash via dividends and buybacks. FY25 returned over 16 billion dollars (about 9.9 billion dividends and 6.5 billion repurchases) and management continues to target high FCF productivity.

Share count trends are modestly down as buybacks offset equity issuance.

The company is also simplifying the portfolio: it substantially liquidated operations in Argentina in FY25 and announced a two-year productivity plan including overhead reductions; the Glad joint venture will wind down in January 2026 with Clorox purchasing P&G’s 20 percent interest for cash at fair value (P&G expects approximately 0.5 billion dollars of proceeds based on CLX disclosures), modestly increasing capital redeployable to core businesses.

We view M&A discipline as sound, with an emphasis on bolt-ons over large, equity-dilutive deals.

Leadership continuity and execution culture are strengths. Jon Moeller, a long-tenured operator and former CFO, has driven the integrated strategy focused on superiority and productivity.

The planned transition to Shailesh Jejurikar as CEO on January 1, 2026, with Moeller as executive chairman, follows P&G’s internal succession tradition and should maintain strategic continuity. CFO Andre Schulten’s communication of a focused productivity plan and measured cash return framework adds credibility to capital allocation.

Governance is standard for a large U.S. issuer, with clear disclosure and guidance practices.