Consumer products earns seen up but oil worries

By Brad Dorfman - Analysis

CHICAGO (Reuters) - Household products makers like Procter & Gamble Co (PG.N: Quote, Profile, Research, Stock Buzz), Colgate-Palmolive Co (CL.N: Quote, Profile, Research, Stock Buzz) and Unilever (ULVR.L: Quote, Profile, Research, Stock Buzz)(UNc.AS: Quote, Profile, Research, Stock Buzz) are expected to post double-digit quarterly earnings increases next week, but soaring oil prices could imperil future growth.

Price increases, new products, cost-cutting measures and strength in emerging markets have helped most of these companies weather surging raw material prices this year and the stocks have shown it, aided by a flight of capital to consumer staples shares as other sectors have been hit, analysts said.

But with oil above $90 a barrel, a 23 percent climb since the end of August, these companies might be hard-pressed to keep offsetting rising costs going into 2008, William Chappell, analyst at SunTrust Robinson Humphrey, said.

"How much do they need price increases to further offset it?" Chappell asked of rising oil and resin prices.

The answer will be closely watched, especially given that investors have already priced a great deal of the improved earnings into the stocks, analysts said.

P&G, maker of Gillette razors, Tide laundry detergent and a host of other products, has seen a 17 percent rise in its stock since the end of June and Colgate is up 14.3 percent.

Overall, the Standard & Poor's household products and personal care index index is up 13.2 percent in that time, compared with 1.6 percent rise in the Standard & Poor's 500 index .SPX.

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