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Consumer staples stalwart Procter & Gamble (NYSE:PG) reported stronger than expected first quarter results Thursday morning. Sales declined 4% year-over-year to $20.7 billion, slightly worse than expected and negatively impacted by 6% due to currency headwinds. Earnings, adjusted for one-time items, increased 5% year-over-year to $1.06 per share, a few cents better than consensus estimates. We see no material impact on our fair value estimate at this time. For a read on how we analyze, P&G's dividend, please click here.

After feeling the pressure from activist shareholder Bill Ackman, the company has refocused on the cost side of the equation, which has helped boost margins. Manufacturing savings and higher price-points boosted gross margins 80 basis points year-over-year to 50.6%. SG&A remained flat at 30% of sales on a relative basis, but decreased over $250 million on an absolute basis, putting the company in a nice position if it can achieve superior pricing.

Sales volumes were pretty weak across the board, though we saw some solid strength from the Baby Care and Family Care segment, where volumes increased 2% and organic sales increased 3%. Grooming sales were also solid, with volumes flat, but organic revenue increasing 2%. Gillette's presence in emerging markets was identified as a strong driver, though it was offset by weakness in Europe.

P&G also reported strong market share trends, growing share in 60% of its products domestically and 45% worldwide. Going forward, the firm confirmed its organic revenue growth guidance of 2%-3%, and it reiterated its core earnings per share guidance of $3.80-$4.00. The company did raise its "all-in" guidance $0.17 per share to $3.78-$4.02 based on an acquisition completed in October, but we prefer to use the company's core EPS figure as it accounts for one-time impacts.

Overall, we thought the quarter was solid, and it appears to have saved CEO Bob McDonald's job at least for now. No one expects double-digit revenue growth at P&G, but we're excited to see the company stripping down its bloated cost structure. The firm generated nearly $2 billion in free cash flow during its first quarter, up substantially from the $1.3 billion it generated during the same period a year ago. P&G remains one of our favorite dividend growth names, and we continue to hold shares in the portfolio of our Dividend Growth Newsletter. To read about how we calculate the fair value of P&G and other firms in our coverage universe, please click here.

Source: Procter & Gamble's Q1 Results Show Why It's One Of Our Favorites

Additional disclosure: PG is included in our dividend growth portfolio.