Gillette Falls Following Feeble Earnings Report

Gillette's earnings were on target, but weak, while Colgate-Palmolive beat estimates by a penny.
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(G) - Get Report

reported feeble third-quarter results late Thursday, although they were in line with Wall Street's estimates. The company forecast more difficulties ahead in the fourth quarter.

Gillette's performance stood in stark contrast to that of another consumer-products company. Earlier


(CL) - Get Report

reported strong numbers that slightly exceeded forecasts.

Investors once again punished the weak and rewarded the strong. Gillette's stock fell sharply to 33 3/4 in after-hours trading on


, after closing the regular New York session at 37 7/8, up 5/8. Colgate, meanwhile, jumped 3 3/4, or nearly 7%, to end the day at 57 3/4.

examined Gillette's woes in a story earlier this week.

For the third quarter ended Sept. 30, Gillette posted net income of $352 million, or 32 cents a diluted share, down from $353 million, or 30 cents a share a year earlier. The earnings met consensus estimates reported by

First Call/Thomson Financial

, but only because analysts had previously been warned of a poor quarter and revised their estimates downward.

Revenue fell to $2.51 billion from $2.53 billion a year ago.

Gillette attributed the weakness to adverse economic conditions in several markets and depressed sales in its


(down 15%) and stationery products (down 18%) businesses.

The bad news will continue. In a statement, Chairman and Chief Executive Michael C. Hawley explained that a large inventory of razor blades, mostly in Europe, would "result in a fourth-quarter sales decline in the mid-single digits and a quarterly earnings decrease in the middle to high teens." Analysts are also wary; William Steele, of

Banc of America Securities

told the

: "The fourth quarter is a mess. I didn't think earnings would be down double-digits." (Steele rates Gillette a market performer.)

Meanwhile, Colgate said its net income rose 12%, $239.7 million, or 38 cents a diluted share, from $214.9 million, or 33 cents a share, in 1998's third quarter. The earnings were a penny higher than expectations, according to First Call.

Colgate's sales edged up modestly, to $2.31 billion in the third quarter, from $2.27 billion a year earlier.