Colgate-Palmolive Tops Earnings Target by a Penny

Consumer products company Colgate-Palmolive posted a slightly higher-than-expected quarterly profit Thursday, aided by price increases and demand in emerging markets.

Analysts have been watching closely to see whether cash-strapped consumers would trade down to lower-priced private-label items as Colgate and its rivals raise prices to offset higher costs.

In the past, Colgate said it had seen little evidence of consumers trading down from its brands to lower-priced goods.

On Thursday, the company said it gained share in the worldwide markets for toothpaste, toothbrushes, mouth rinse, bar soaps and shampoo.

The maker of Hill's Science Diet pet food as well as Colgate toothpaste earned $499.9 million, or 94 cents per share, in the third quarter, up from $420.1 million, or 77 cents per share, a year earlier.

Excluding restructuring charges, the company earned 99 cents per share.

Analysts, on average, had forecast 98 cents per share, according to Reuters Estimates.

Sales rose 13 percent to $3.99 billion.

Price increases, taken to offset rising commodity costs, accounted for 6.5 percentage points of the increase, while a weaker dollar made up 3.5 points.

Volume, a measure of goods sold that excludes currency and price fluctuations, rose 3 percent.

Sales rose 4.5 percent in North America, 8.5 percent in the Europe/South Pacific segment, 18 percent in Greater Asia/Africa and 21 percent in Latin America.

Amy Sancetta

Price increases and cost-savings initiatives were not enough to completely offset higher packaging and raw material costs during the quarter, and gross profit margins decreased.

Colgate forecast a smaller margin decrease in the fourth quarter, as higher prices stick and commodity costs ease.

The New York-based company said it was "comfortable" with external expectations regarding its results for the fourth quarter and full year.

Analysts on average are expecting earnings per share of 99 cents for the fourth quarter and $3.86 for 2008.

For 2009, Colgate expects gross margin to be "up solidly" as higher prices, cost cutting and benefits from lower oil and commodities costs offset a strengthening U.S. dollar.

It sees earnings-per-share increasing by a double-digit rate.

Colgate shares closed Wednesday at $60 on the New York Stock Exchange, down 23 percent this year.

It has slightly outperformed its peers on the Dow Jones U.S. Personal Goods Index , which has fallen 26 percent over the same period.

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