Gillette

(G) - Get Report

posted strong third-quarter revenue and earnings growth, exceeding analyst expectations thanks to favorable European currency exchange rates.

For the third quarter, Gillette earned $416 million, or 41 cents a share, on revenue of $2.41 billion, vs. $354 million, or 33 cents a share, on revenue of $2.17 billion in the year-ago period. The company handily beat earnings expectations, as analysts polled by Thomson First Call had expected the company to earn 36 cents a share on sales of $2.3 billion.

The stock is trading up nearly $1 at $33.42 in early trading and is up 7% for the year.

While the 18% earnings and 11% earnings growth appears impressive, the company acknowledged that the gains were largely driven by favorable exchange rates. Like many companies this earnings season, Gillette's revenue got a 5% boost due to European exchange rates that inflate the value of continental sales when the figures are converted to U.S. dollars. The company also benefited from a 1% decline in its effective tax rate.

Based on the company's data, backing out the non-operational anomalies leaves earnings of 33 cents a share, unchanged from a year ago, on revenue of $2.3 billion.

The company reported revenue and earnings gains for the quarter across all business lines. The company spent heavily on advertising to support brands like the Mach 3 razor, helping drive a 17% gain for the blades and razors group. The company hinted, however, that it is considering a restructuring of European manufacturing and distribution operations for the group, but did not elaborate on costs, timing or the specific reasons driving the changes.

Gillette said it's "studying the possible realignment of its European blade and razor manufacturing facilities and distribution network to streamline and strengthen its operations."

The company's Duracell battery division also posted a strong quarter with revenue rising 7%, driven by massive battery purchases in the northeast U.S. during the August blackout. Its personal care, electric shaver and oral care divisions also posted double-digit revenue gains. The company did not update guidance for the fourth quarter. It's currently expected to earn 36 cents a share on revenue of nearly $2.7 billion.

At $33.42, Gillette is trading at a price-to-earnings ratio of 23 times expected 2004 earnings vs. 20 for

Colgate-Palmolive

(CL) - Get Report

, 21 for

Proctor & Gamble

(PG) - Get Report

and 14 for

Energizer

(ENR) - Get Report

.