LG Electronics Inc <066570.KS> posted better-than-expected results thanks to strong sales of key handsets and TVs, but faces weakening earnings momentum.

The world's No. 3 mobile phone maker is headed for a weaker fourth quarter on higher marketing costs and price competition for its bread-and-butter handsets and flat-screen TV sets.

LG, which trails Nokia and Samsung Electronics Co Ltd <005930.KS> in mobile phones, might be hit by a recovery in the won after the local currency's weakness helped LG weather the global crisis.

A stronger won will definitely hit its overseas sales, said Chang In-whan, CEO and fund manager at KTB Asset Management.

It wouldn't be a big problem if the won remains at around 1,150 per dollar, but the currency is seen strengthening past the 1,100 level next year.

Other than the currency factor, analysts were confident about LG's ability to perform well in 2010.

Profit might go down due to larger marketing expenses or lower product prices, but if it brings bigger market share, it would be better to spend on marketing this quarter for next year, said Jay Yoo, an analyst at Korea Investment & Securities.

As of 0520 GMT, LG shares rose 2.5 percent following the results, recovering from early losses versus a 0.2 percent fall in the broader market <.KS11>. The stock is up about 60 percent so far this year, outperforming the market's 47 percent gain.

On Wednesday, LG reported a global-basis operating profit of 850 billion won ($732.9 million) in the third quarter, above a consensus forecast of 757.8 billion won by analysts polled by Thomson Reuters I/B/E/S.

PLAYING CATCHUP FOR LED

LG, which battles Japan's Sony <6758.T> for the world's second place in LCD televisions, should have little problem expanding its sales of premium LED televisions, a market so far dominated by Samsung.

It is just a matter of time. By the second or third quarter of next year, LG should notch up significant sales of LED TVS, said Harrison Cho, an analyst at KB Investments and Securities.

LG sold a record 4.01 million LCD TVs in the third quarter. It also sold a record 31.6 million handsets in July-Sept, up from 29.8 million units sold in April-June.

Last week, Nokia reported its worst results, hit by a major writedown and as it lost market share in smartphones.

LG's quarterly net profit was 807 billion won, up sharply from a year ago when it was hit hard by currency-related losses. The figure also beat a consensus forecast for a 667 billion won net profit from Thomson Reuters I/B/E/S.

LG benefited from strong sales of flat-screen TVs and record operating profits at affiliate LG Display Co Ltd <034220.KS>.

The company was cautious on the outlook.

Entering the peak season for TV, modest sales growth is expected (in the fourth quarter), LG said in a statement.

Price erosion in the TV and handset business and an increase in marketing/R&D investment will likely result in lower profitability.

(Additional Reporting by Cheon Jeong-woo and Shin Ji-eun; Editing by Jonathan Hopfner and Anshuman Daga)

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