Deutsche Bank also lowered its price target to $90 from $95 on shares of the Cincinnati, OH-based consumer goods company.
However, the firm noted it's positive about the company's medium to long-term opportunity. Also, its full-year earnings per share projection is $3.87, in line with the Wall Street consensus estimate.
At its investor day last month, P&G management pointed to incrementally worse foreign exchange headwinds in the December quarter and moving forward. Deutsche Bank believes expectations "are in the right place for P&G unlike many others."
"P&G typically faces onerous f/x transaction impact however we have not incorporated any negative margin impact given EPS flexibility from restructuring savings," the firm wrote in a note.
More than half of P&G's sales come from outside of the U.S. In fiscal 2016, North America made up 44% of net sales, while 56% came from Europe, Asia Pacific, Greater China, Latin America and India, the Middle East and Africa. A stronger dollar makes its products more expensive overseas.
Shares of P&G, whose brands include Crest, Dawn and Tide, were little changed at $84.90 in mid-morning trading today.
"We take a breather, believing CEO James Quincey is the right person for the turnaround job but investor migration out of staples, clear EM and health and wellness related consumption headwinds and likely negative earnings revisions should inhibit near-term outperformance," the firm said.
Last week, the beverage giant said long-time CEO Muhtar Kent will step down effective May 1, 2017. COO Quincey will succeed Kent.
Shares of Coca-Cola were slightly lower by 0.26% to $41.79 this morning.
More discretionary names Estee Lauder (EL - Get Report) , Coty (COTY - Get Report) Newell Brands (NWL - Get Report) and Spectrum Brands (SPB - Get Report) , along with "cheap" Avon Products (AVP - Get Report) and fast-growing and strategically interesting Blue Buffalo Pet Products (BUFF) are the firm's top picks for 2017.
"Even with broad pressure on the group, we see aforementioned relative winners with evolving macro factors critical to key earnings momentum that drives share price performance. With the strong dollar, f/x should again clip expected outsized earnings growth at the multinationals which should help the more commodity exposed, domestic names unless we are entering an anomalous period of a strong dollar and rising commodities," Deutsche Bank added.