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Procter & Gamble ( PG), which makes everything from diapers to batteries, dominates every aisle of the drugstore. So why are its competitors projected to grow faster?

It's hard to imagine the sort of catastrophe that could throw this consumer juggernaut off course. But as customers limit spending in the face of a bleak economy and a new chief executive gets ready to take the helm, even this behemoth deserves caution from investors.

TheStreet.com Ratings

Last week, P&G said Robert A. McDonald, the firm's chief operating officer, will replace A.G. Lafley as chief executive officer on July 1. Lafley has led the firm since 2000 and will remain chairman of its board.

While McDonald, a 30-year P&G veteran, has the market development and management experience needed of a CEO of a multinational consumer products firm, changes at the top can lead to management reshufflings and departures of unsuccessful candidates for the top job.

The move comes as analysts question whether Cincinnati, Ohio-based P&G is too big and diverse to deliver steady growth. While the company is known for its market-savvy strategies and merchandising talent, firms with narrower product lines are increasingly posing a threat.

There's also a fear that penny-pinching consumers will bypass well-known P&G brands for cheaper options. While the firm also offers less costly alternatives to its premium brands, they come with lower profit margins.

Analysts expect the company's fiscal 2010 earnings, which include results from the jettisoned Folgers unit, to fall 11%. The company's forecast calls for no more than 4% profit growth for the fiscal year that ends next June, excluding the Folgers sale.

Earnings for fiscal 2009, which ends in two weeks, are expected to rise 16%.

Rival Colgate-Palmolive ( CL), on the other hand, is forecast to increase its per-share net income 11% in fiscal 2010, which ends in December of next year. Unilever ( UN) ( UL) is projected to boost earnings more than 25% next year.

Niche competitors, such as Clorox ( CLX), Energizer Holdings ( ENR), Kimberly-Clark ( KMB), Estee Lauder ( EL), Bristol-Myers Squibb ( BMY) and Johnson & Johnson ( JNJ), are expected to expand earnings by 7% to 20% next year.

While a fiscal year that ends in June might reflect more recessionary pain than a December-ending one, stock investors haven't expressed much confidence in the company. The shares are down 16% this year, making it the third-worst performing member of the S&P 500 Consumer Staples Index. The 41-company benchmark has lost 2.8%. P&G's stock price nearly tripled between early 2000 and late 2007.

Founded in 1837, P&G has paid dividends without interruption since its incorporation in 1890 and has increased payouts for 53 consecutive years. Despite a disappointing fiscal third quarter, the company boosted its dividend 10% in April.

Moreover, P&G's $84 billion in annual sales is twice as big as those of its main competitors. And, with 138,000 employees in 80 countries, it's the largest advertiser in the world.

Even so, P&G has earned a grade of C-plus from TheStreet.com Ratings, which amounts to a "hold" recommendation. Colgate-Palmolive, with $18 billion in sales, has earned an A-minus, a "buy" rating. It's one more reason to give investors pause before buying shares.

TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.
Richard Widows is a senior financial analyst for TheStreet.com Ratings. Prior to joining TheStreet.com, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.

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