Executive Summary

Mixed quarter: revenue $1.06B (-0.9% YoY) and adjusted EPS $0.57 (+7.5% YoY) as margin compression from infant formula scrap and lower overhead absorption offset cost savings; both revenue and EPS came in below S&P Global consensus, but EPS guidance was reaffirmed .
Company reaffirmed FY25 adjusted EPS $2.90–$3.10 and margin targets, while steering FY25 net sales growth to the lower end of prior ranges amid slower-than-expected infant formula recovery and softer consumption .
Tariff headwind outlook improved vs Q1: Q2 now assumes ~$10–$20M COGS impact starting Q4’25 and ~$50–$60M annualized, down from Q1’s $30–$40M and $145–$155M frameworks; mitigation through pricing and insourcing continues .
Strategic portfolio streamlining advanced with agreement to sell Dermacosmetics for up to €327M; proceeds earmarked to strengthen the balance sheet and accelerate deleveraging .
Potential stock catalysts: modest top-line de-risking offset by margin/FCF discipline, reduced tariff headwind vs Q1 scenario, and portfolio monetization; near-term sentiment may hinge on infant formula trajectory and delivery against reaffirmed EPS outlook .

What Went Well and What Went Wrong

What Went Well
- Reaffirmed FY25 adjusted EPS range ($2.90–$3.10) and margin targets despite macro and category softness, reflecting cost controls and lower interest expense .
- International segment execution: CSCI organic sales +2.7% with adjusted operating margin expanding 260 bps to 23.6% on pricing, SC Reinvention, and Project Energize benefits .
- CEO tone on brand/store brand share gains: “our store brands and key brands are gaining share… even amid soft seasonal consumption trends” .
What Went Wrong
- Revenue and EPS missed consensus; net sales -0.9% YoY, adjusted gross margin down 250 bps to 38.1% on infant formula scrap and lower overhead absorption; CSCA margins compressed (adj. OM -300 bps) .
- US category headwinds persisted: Digestive Health (-12.9%) and Oral Care (-18.1%) weighed on CSCA; infant formula recovery slower than anticipated .
- Organic sales slightly negative (-0.1%) as pricing (-0.6%) offset volume/mix (+0.5%); divestitures/exited products (-2.5%) also pressured growth .

Financial Results

Overall results vs prior quarters (oldest → newest)

Metric	Q4 2024	Q1 2025	Q2 2025
Net Sales ($USD Billions)	$1.138	$1.044	$1.056
Adjusted Diluted EPS ($)	$0.93	$0.60	$0.57
Adjusted Gross Margin %	37.2%	41.0%	38.1%
Adjusted Operating Margin %	17.0%	14.0%	12.8%

Q2 2025 vs S&P Global consensus

Metric	Consensus	Actual	Delta
Revenue ($USD Billions)	$1.084*	$1.056	-$0.027 (-2.5%)*
Primary EPS ($)	$0.594*	$0.57	-$0.024*
EBITDA ($USD Millions)	$165*	$154.2*	-$10.8*

Values marked with * retrieved from S&P Global.

Q2 2025 YoY vs Q2 2024

Metric	Q2 2024	Q2 2025	YoY
Net Sales ($USD Billions)	$1.066	$1.056	-0.9%
Adjusted Gross Margin %	40.6%	38.1%	-250 bps
Adjusted Operating Margin %	13.1%	12.8%	-30 bps
Adjusted EPS ($)	$0.53	$0.57	+$0.04 (+7.5%)

Segment performance (oldest → newest)

Segment	Q4 2024 Net Sales ($M)	Q1 2025 Net Sales ($M)	Q2 2025 Net Sales ($M)
CSCA	744.1	620.7	622.0
CSCI	394.1	423.1	434.3

Segment	Q4 2024 Adj. Op Income ($M)	Q1 2025 Adj. Op Income ($M)	Q2 2025 Adj. Op Income ($M)
CSCA	145.8	100.1	71.2
CSCI	83.4	86.3	102.5

Segment	Q4 2024 Adj. OM %	Q1 2025 Adj. OM %	Q2 2025 Adj. OM %
CSCA	19.6%	16.1%	11.4%
CSCI	21.2%	20.4%	23.6%

Selected KPIs – CSCA category net sales (oldest → newest)

Category (CSCA)	Q4 2024 ($M)	Q1 2025 ($M)	Q2 2025 ($M)
Upper Respiratory	130.3	137.9	123.3
Nutrition	145.7	104.8	95.6
Digestive Health	135.7	103.0	109.7
Oral Care	70.6	62.0	60.0
Women’s Health	19.1	15.0	18.7

Balance sheet and cash flow snapshots

Metric	Q1 2025	Q2 2025
Operating Cash Flow YTD ($M)	$(65) in Q1; cumulative $(65)	+$76 in Q2; cumulative $11
Cash & Equivalents ($M)	$409.9	$454.2
Total Debt ($B)	$3.63	$3.65
Capex YTD ($M)	$26	$45

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Reported Net Sales Growth	FY 2025	0%–3%	0%–3% (towards lower end)	Maintained; bias to low end
Organic Net Sales Growth	FY 2025	1.5%–4.5%	1.5%–4.5% (towards lower end)	Maintained; bias to low end
Adjusted Gross Margin	FY 2025	~40%	~40%	Maintained
Adjusted Operating Margin	FY 2025	~15%	~15%	Maintained
Adjusted Diluted EPS	FY 2025	$2.90–$3.10	$2.90–$3.10	Maintained
OCF Conversion to Adj. NI	FY 2025	~100%	~100%	Maintained
Free Cash Flow as % Sales	FY 2025	~6%	~6%	Maintained
Net Leverage	FY 2025	~3.5x adj. EBITDA	~3.5x adj. EBITDA	Maintained
Tariff COGS Headwind	Q4’25; Annualized	Q4: $30–$40M; Full-year: $145–$155M	Q4: $10–$20M; Full-year: $50–$60M	Reduced materially
Dividend (Quarterly)	Ongoing	—	$0.29 per share (declared Jul 30, 2025)	Maintained cash return

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Infant formula recovery	Q4: network augmentation weighed on FY24; Q1: recovery driving margin expansion, +19% CSCA infant formula	Recovery continuing but “slower than anticipated”; scrap increased from production variability	Moderating vs Q1 expectations
Tariffs / Macro	Q1: estimated Q4’25 COGS +$30–$40M; annual +$145–$155M, 80% CSCA Oral Care; mitigation via pricing/insourcing	Reduced to Q4’25 +$10–$20M; annual +$50–$60M; mitigation reiterated	Improved outlook
Portfolio streamlining	FY24 exits; project Energize savings; plan to focus on “high-grow” brands	Agreement to sell Dermacosmetics for up to €327M; proceeds to deleveraging	Accelerating
A&P and brand building	Q1: higher A&P (Opill, infant formula activation)	Lower A&P amid soft seasonality; upgraded brand building delivering share gains	Tactical pullback; focus on efficiency
Supply chain & productivity	SC Reinvention + Energize supported margins (Q4, Q1)	Continued benefits; infant formula scrap offset some gains	Mixed: structural improves vs episodic variability

Management Commentary

Strategic message: “Our diversified portfolio—spanning more molecules at more price points—continues to provide resilience… even amid soft seasonal consumption trends” — Patrick Lockwood‑Taylor, President & CEO .
Outlook stance: “While recovery in our infant formula business continues, it is slower than anticipated… we reaffirm our full-year earnings outlook” .
Capital allocation: Dermacosmetics sale “will be prioritized towards strengthening our balance sheet and accelerating our net leverage goals” .

Q&A Highlights

The full Q2 2025 earnings call transcript was not retrievable in the document repository (database inconsistency), and third-party sites require subscription; as a result, Q&A specifics are unavailable. Management’s prepared remarks clarified: (i) FY25 topline biased to the lower end while EPS and margin targets are reaffirmed, (ii) infant formula recovery is ongoing but slower, and (iii) tariff impacts are now expected to be lower than Q1 assumptions with mitigation through pricing and insourcing .

Estimates Context

Q2 2025 vs S&P Global consensus: revenue $1.056B vs $1.084B*, Primary EPS $0.57 vs $0.594*; EBITDA $154.2M* vs $165.0M* — modest miss on top line and EPS, with EBITDA below consensus as gross margin compressed .
FY25 Street positioning: EPS Normalized consensus $2.77* sits below the company’s reiterated $2.90–$3.10 guidance, suggesting either embedded conservatism in Street models or skepticism on delivery; reported revenue consensus $4.247B* vs topline guided to low end may warrant minor revenue trimming, while EPS could remain anchored by cost actions .