Analyst Wendy Nicholson cut her rating on Procter & Gamble (ticker: PG) to Neutral from Buy, and lowered her price target to $150 from $165. She noted that results were above expectations. But the company’s planned price increases and other responses to higher input costs left her feeling that “the next several couple quarters will likely see incremental pressure and that results could be bumpy,” she wrote.

P&G’s price increases on some of its portfolio won’t take effect until September, so commodity inflation will pressure the company over the next few months. The company also is facing less favorable foreign exchange rates and difficult comparisons to 2020, when the pandemic boosted sales. Nicholson also warns that some emerging markets where P&G operates “look to be getting worse before they get better,” without much visibility into a timeline for recovery.

These factors could limit the company’s guidance and weigh on its fiscal 2022 outlook, Nicholson warns.

Moreover, while the shares look relatively cheap—trading at a 6% premium to the S&P 500, compared with 25% historically—near-term headwinds will likely keep that valuation from expanding.

That said, Nicholson still believes the company is a good long-term core holding, adding that it looks well-positioned in some key markets and categories. She highlights its strong dividend growth and cash flow, as well as its “terrific track record of innovation and marketing.” But for now, she says it’s safer to wait it out on the sidelines.

Write to Teresa Rivas at teresa.rivas@barrons.com