P&G Earnings Exceed Analysts' Expectations

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Procter & Gamble Co. (PG), the maker of Crest (search) toothpaste and Tide laundry detergent, posted a 4 percent rise in quarterly profit on Tuesday, as strong sales of health and beauty items offset rising raw material costs and the impact of hurricanes on its coffee business.

P&G, which added razors to its lineup after acquiring Gillette Co. (search) earlier this month, said earnings rose to $2.03 billion, or 77 cents per share, in its fiscal first quarter ended Sept. 30, from $1.94 billion, or 70 cents a share, a year earlier.

Analysts, on average, expected Cincinnati-based P&G to earn 76 cents per share, according to Reuters Estimates.

"Today's release should provide another measure of comfort that PG is in great shape to integrate [the] transforming Gillette acquisition," said Deutsche Bank analyst William Schmitz, who rates the shares as "buy."

He said that in the near term P&G "is poised to overcome challenges like low-income consumer weakness, sluggish Europe and spiking commodities."

P&G shares dipped to $55.70 on the Inet (search) electronic brokerage system on Tuesday from the New York Stock Exchange close of $55.99.

Like other consumer products companies, P&G has been hit with higher raw materials costs, and is changing manufacturing formulas and seeking other ways to cut spending. It was forced to shut coffee operations in New Orleans due to Hurricanes Katrina and Rita, impacting production of its Folgers and Millstone brands.

Net sales rose 8 percent to $14.79 billion, in line with analysts' expectations, driven by new products such as Tide with Febreze, foreign exchange rates and price increases. Unit volume rose 6 percent.

For the current fiscal second quarter, P&G forecast net sales growth of 23 percent to 26 percent, with 20 percent to 21 percent of growth coming from acquisitions and divestitures. Earnings per share for the quarter, including Gillette, should be 66 cents to 69 cents, P&G said.

P&G forecast fiscal-year sales growth of 17 percent to 19 percent, including 14 percent to 15 percent growth from acquisitions and divestitures. P&G said the Gillette acquisition should cut earnings by 20 cents to 26 cents for the year, in line with its previous expectations.

The company forecast full-year earnings of $2.54 to $2.60 per share, including an 11 cent per share impact from expensing stock options.

Analysts, on average, expected P&G to earn 67 cents per share in the current quarter and $2.59 per share this year.

P&G shares rose 12.2 percent during the quarter, outpacing the Dow Jones Industrial Average, which gained about 2.9 percent. P&G shares touched an all-time high of $59.55 on October 3, the first day of trading after its acquisition of Gillette was completed.