Moody's Raises P&G Outlook to Positive, Cites Strong Cash Flow

Moody's Ratings has reaffirmed Procter & Gamble Company's (P&G) Aa3 senior unsecured ratings, long-term issuer rating, and Prime-1 commercial paper program ratings. The firm also affirmed the Aa3 senior unsecured ratings on guaranteed debt issued by The Gillette Company and industrial revenue bonds backed by P&G.

The outlook for P&G has been changed to positive from stable, reflecting the company's ability to generate significant positive free cash flow and earnings growth through pricing, innovation, and cost savings programs. Credit metrics are consistently strong, with retained cash flow to net debt well above 25% and debt to EBITDA leverage below 2x.

The acquisition of supplements maker Thorne for $3.8 billion demonstrates P&G's ability to increase its presence in high-growth markets while maintaining low leverage and strong cash flow metrics. Moody's expects leverage pro forma for the Thorne acquisition to rise to just above 1.6x in the fiscal year ending June 2027, returning below 1.6x through innovation and cost optimization.