UPDATE 4-New products, overseas sales drive P&G profits

* EPS $1.02 vs Wall Street view $1.00

* Volume grows more in emerging markets

* Marketing spending, input costs still a factor

* Volume gains could be tested – analyst

* Shares rise 1 percent
(Adds analyst comments, financial details)

By Jon Lentz

NEW YORK, Oct 27 (BestGrowthStock)- Procter & Gamble Co posted a
higher-than-expected quarterly profit on new products and
strength in markets like China and Brazil, but said additional
marketing spending and higher commodity costs would hurt the
current quarter.

Cost cuts also helped boost profits at P&G, the the world’s
largest household products maker, as the sluggish U.S. and
European economies caused consumers to buy lower-priced
products in some categories.

As the U.S. economy haltingly recovers from recession,
consumer products companies are using promotions and focusing
on new products with fresh features to attract purchases. P&G
(PG.N: ), which makes products that range from Pampers diapers to
Olay skin cream, has the size to do well in this type of
market, analysts said.

“Given that P&G has the deepest pockets and strongest
innovation pipeline, we anticipate the company will benefit the
most in the current competitive environment,” Stifel Nicolaus’s
Mark Astrachan wrote in a note to clients.

P&G’s fiscal first-quarter, which ended Sept. 30, showed
pockets of strength in its fabric care, home- and baby-care
businesses that were boosted by lower prices and promotions.
said Sanford Bernstein analyst Ali Dibadj.

“The pricing is not becoming more benign in the industry,”
Dibadj said. “Competition is still high.”
(For a graphic on P&G earnings, click on
http://r.reuters.com/tam52q)

STRONG VOLUME IN CHINA, BRAZIL

P&G said on Wednesday that first-quarter profit (Read more your timing to make a profit.) fell to
$3.08 billion, or $1.02 per share, from $3.31 billion, or $1.06
per share, a year earlier.

Analysts on average estimated earnings of $1 a share.

Volume, a measure of products shipped that factors out
currency fluctuations and price changes, rose 8 percent, with
double-digit increases in developing markets such as China and
Brazil.

But pricing, unfavorable currency exchange rates and the
shift by consumers to lower-priced products pressured overall
revenue.

Revenue rose just 2 percent to $20.12 billion, compared
with the analysts’ average estimate of $20.24 billion.

The gains in volume will be tested in the current quarter
as the company juggles challenges including price competition,
rising commodity costs and unfavorable foreign exchange rates,
said Morningstar analyst Lauren DeSanto.

“They (P&G) probably are profitably taking market share,”
DeSanto said. “The question is going to be over coming quarters
how sustainable is that. What’s the level of spending that’s
needed for some of these categories?”

On Tuesday, Kimberly-Clark Corp (KMB.N: ), which competes
with P&G in such categories as diapers, tissues and tampons,
posted lower-than-expected earnings due to sluggish sales and
lower prices. [ID:nN26284542]

P&G said it expected full-year earnings per share of $3.91
to $4.01, excluding special items. Analysts on average had
forecast $3.97 per share, according to Thomson Reuters
I/B/E/S.

P&G has invested in new products, including Pampers Dry Max
diapers, the Fusion ProGlide razor and Crest 3D White
tooth-whitening strips, and plans to continue introducing more
new products this fiscal year.

But DeSanto said that there were some weak points among the
company’s higher-priced products.

“It seems to me it’s not the prestige, it’s not the
premium-priced, it’s the mid-tier to lower-tier (products) that
are accelerating,” DeSanto said.

P&G’s developed markets grew below the company’s
expectations at around 1 percent, while developing markets grew
eight times as fast, McDonald said.

P&G’s shares rose 1 percent to $62.92 in midday trading on
the New York Stock Exchange.
(Reporting by Jon Lentz and Brad Dorfman; Editing by Lisa Von
Ahn and Maureen Bavdek)

UPDATE 4-New products, overseas sales drive P&G profits