"We are very sastisfied with these results," said Chief Financial Officer Clayton Daley, in an interview on CNBC's "Squawk Box."
The Cincinnati company, which makes Gillette razors, Pampers diapers and Tide laundry detergent, said net income in the second quarter quarter ended Dec. 31, climbed to $2.86 billion, or 84 cents a share, from $2.55 billion, or 72 cents a share, a year ago.
The earnings were a penny stronger than analysts were expecting, but sales fell short of the expected $19.47 billion, reported by Thomson Financial.
Sales rose 8% to $19.73 billion from $18.3 billion last year, aided by a weak dollar. Currency added three percentage points to its revenue growth, which was "a little more" than the company had expected, Daley said.
Volume, which excludes the effect of currency and price changes, rose 4%, while organic sales climbed 5%, which was in the middle of the company's 4% to 7% forecast.
P&G attributed the volume gains to strong sales of new products such as Olay Definity and Tide Simple Pleasures. Gillette's Blades & Razors division contributed an 11% sales increase led by the year-old Gillette Fusion.
Strong growth in these businesses helped to offset weakness at the company's snacks, coffee and pet healthcare businesses.
According to Daley, the snacks, coffee and pet healthcare businesses have been hurt by competitive pressures, including promotional and discounting activity.
"While P&G did not deliver sales upside this quarter, we think the business remains healthy and we maintain conviction in our plus-5.8% organic sales estimate for fiscal year 2007," said Christopher Ferrara, an analyst at Merrill Lynch, in a research note.
P&G felt confident enough to boost its forecast for the this year. Earnings for the fiscal year are expected to be in the range of $2.99 to $3.03 a share, up from a prior estimate of $2.97 to $3.02 a share, which was provided in October.
Sales for the year are expected to grow by 10% to 12%, up from previous guidance for full-year sales growth of 9% to 11%. The forecast implies sales of $75.04 billion to $76.41 billion.
One factor contributing to the higher earnings forecast is a lower-than-expected reduction in earnings from the $57 billion Gillette acquisition in 2005, the company said. The deal was expected to lower earnings by 12 cents to 18 cents a share this year, but now the company expects the reduction to be at the low end of the range.
In the fiscal third quarter, P&G sees earnings of 72 cents to 74 cents a share. Total and organic sales are projected to grow 7% to 9% and 5% to 7%, respectively.
The average estimates of analysts surveyed by Thomson Financial were for earnings of 74 cents a share and revenue of $18.4 billion, which would be 7% above year-earlier sales.
Although the cost of oil has fallen sharply in recent weeks, it may take a while for this trend to boost P&G's profits, according to Daley. High oil prices have led to increases in the cost of energy and raw materials such as packaging and superabsorbants.
"We expect (raw material costs) to moderate going forward, although we really see a lag time between the time when energy costs go down and the time we see lower costs in raw materials and packaging," Daley said, on CNBC.
P&G held a conference call and webcast at 8:30 am New York time.