Procter & Gamble Co

posted better-than-expected quarterly earnings on Thursday, but trimmed its fiscal 2009 outlook and did not offer a 2010 forecast at a time when investors are searching for clarity amid the recession.

The news pushed down shares of P&G and rival Colgate-Palmolive Co , whose earnings also surpassed Wall Street expectations.

P&G said it now expected to earn $4.20 to $4.25 a share in the fiscal year that ends in June, instead of the $4.20 to $4.35 it forecast back in January. It also said sales growth for the year, excluding the impact of currency fluctuations, acquisitions and divestitures, would be 2 percent to 3 percent, instead of 2 percent to 5 percent.

Although we think expectations were low heading into the quarter, (P&G) stock should trade down as the underlying results in the quarter were very weak, JPMorgan analyst John Faucher said in a research note. He rates the stock neutral.

With guidance coming down, we believe that numbers for 2010 certainly will come down, as this quarter does not inspire any confidence, he added.

P&G did not give a profit forecast for fiscal 2010, which begins in July.

Shares of P&G were off nearly 3 percent, while Colgate was down less than 1 percent.

Both companies hiked prices and cut costs to help offset weaker demand in the recession. They are rolling out new products to entice thrifty consumers back to stores.

LOWER EARNINGS AT P&G

P&G, known for products such as Gillette razors and Tide laundry detergent, posted a 4 percent drop in quarterly profit as consumers traded down to less-expensive items in the challenging economy.

The company has been highlighting products at a variety of prices to keep cost-conscious consumers interested in its brands. For example, shoppers looking for lower-priced laundry detergent can buy Era, which costs about 35 percent less than regular Tide. Those willing to pay for added features spend 60 percent more than they would pay for regular Tide to buy Tide Total Care, which reduces fading.

We believe P&G is well-equipped to weather the sluggish economic environment, with the impact of moderating commodity costs expected to lead to improving margins in coming quarters, while valuation remains compelling, Oppenheimer analyst Joseph Altobello said in a note to clients. He rates the shares outperform.

P&G earnings fell to $2.61 billion, or 84 cents per share, in the third quarter ended on March 31 from $2.71 billion, or 82 cents per share, a year earlier, when there were more shares outstanding.

Analysts polled by Reuters Estimates had expected a profit of 80 cents a share.

Sales fell 8 percent to $18.42 billion, below the $18.88 billion analysts had forecast. Volume declined 5 percent as retailers stocked fewer items, but organic sales rose 1 percent.

P&G said it was comfortable with the analysts' consensus earnings-per-share estimate of $4.22 a share for the year, with a range of $4.20 to $4.25. P&G expects net sales to fall 2 percent to 4 percent this year, pressured by unfavorable foreign exchange.

PROFIT UP AT COLGATE

Colgate, known for its namesake toothpaste, reported first-quarter profit of $507.9 million, or 97 cents per share, up from $466.5 million, or 86 cents per share, a year earlier. The results were a penny higher than analysts had expected.

Sales fell 5.5 percent to $3.50 billion, while analysts had forecast $3.57 billion. Unit volume fell 0.5 percent.

Both organic sales and global pricing increased 8 percent.

Colgate Chief Executive Ian Cook said the benefits of easing commodity and oil prices had begun to flow through, and coupled with higher pricing and expense-cutting, should offset the expected hit by the stronger U.S. dollar on raw and packaging material costs.

Gross profit margin should be up at least at the high end of Colgate's targeted range of 75 to 125 basis points for the year, he said, and he is comfortable with external profit expectations for both the second quarter and the year.

Analysts expect Colgate to earn $4.22 a share this year.

Shares of P&G fell 2.6 percent to $49.11 in morning New York Stock Exchange trade. Through Wednesday, the stock had fallen 18.4 percent this year.

Colgate stock, which had been down 12.9 percent year to date, slipped 0.6 percent to $59.33.

(Reporting by Ben Klayman and Jessica Wohl; Editing by Lisa Von Ahn)