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Procter & Gamble Walks Past Estimate

Sales surge 27% thanks to the Gillette acquisition.
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Procter & Gamble's

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second-quarter earnings rose a better-than-expected 29% from a year ago, reflecting the Gillette acquisition, and the consumer products titan guided full-year results toward the high end of estimates.

P&G earned $2.55 billion, or 72 cents a share, in the quarter. The number was reduced by about 7 cents a share by the acquisition of Gillette, including share dilution and 3 cents a share of charges. Analysts were forecasting earnings of 69 cents a share. A year ago, P&G earned $2 billion, or 72 cents a share.

Sales rose 27% from last year to $18.34 billion, beating the Thomson First Call consensus estimate of $18.23 billion. The company posted unit-volume growth of 27% in the quarter and said organic unit growth, which excludes acquisitions, rose 6%, with gains in every segment and region.

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For its third quarter ending in March, P&G expects to earn 58 cents to 61 cents a share, with the Gillette acquisition reducing earnings by 7 cents to 10 cents a share, including 2 cents to 3 cents a share of one-time charges. Analysts were forecasting earnings of 60 cents a share.

For the full year ending in June, P&G expects to earn $2.58 to $2.62 a share, reflecting a 3-cent increase to the midpoint of previous guidance. The estimate includes 19 cents to 23 cents a share of Gillette dilution, including charges of 9 cents to 11 cents a share. Analysts were forecasting $2.59 a share in the year.

In the second quarter, P&G said every business segment except snacks and coffee, which were impacted by Hurricane Katrina, delivered mid-single digit or higher organic volume growth. In addition, every geographic region delivered organic growth, with developing regions growing organic volume in the mid-teens.

Foreign exchange had a negative 2% impact on sales growth, offset by gains in pricing and product mix.

"Earnings growth was primarily driven by growth on the base P&G business and the addition of Gillette, partially offset by acquisition related costs, increased commodity prices and costs associated with Hurricane Katrina. Hurricane Katrina's impact on the Coffee business negatively affected earnings per share by about $0.01 in the quarter," P&G said.

The stock closed at $58.82 Thursday, 22.7 times the 2006 earnings consensus. The 52-week range is $51.16 to $59.70.