NEW YORK (CNN/Money) - Procter & Gamble Co. posted a 16 percent profit rise for the latest quarter as improved sales of its Clairol beauty products and other household goods helped the company top recently raised Wall Street forecasts.

This marks the first quarter since 1995 that both volume and earnings per share rose at a double-digit rate, the latest sign that the company is reaping the benefits of a restructuring begun in 1999.

"They're clearly benefiting from the restructuring savings, but on a more sustainable basis they're getting unit growth, which certainly helps as it flows through their lower cost structure," Ann Gillin Lefever, consumer products analyst at Lehman Brothers, told Reuters.

P&G (PG: up $0.49 to $90.49, Research, Estimates) shares, which have been steadily rising since November, headed slightly higher in midday trading Tuesday.

The stock is currently trading at 24 times projected 2002 earnings, which outpaces the Standard & Poor's 500 stock index by about 6 percent, a valuation Banc of America Securities Analyst William Steele called "fair," given the margin improvements and sales boost from Clairol and other products amid a sluggish economy.

"Their basic strategy is focusing on core brands, core customers and core flow, and that's an appropriate strategy," said Steele, who rates the stock a "market outperform." "I think you're starting to see A.G. Lafley getting this company to that sustainable level of performance by focusing on bigger, but fewer core products."

P&G has been cutting jobs and expenses in the last year to boost margins while trying to drive sales of higher margin products such as beauty and healthcare. That strategy was partially behind last May's purchase of the Clairol hair care business from Bristol-Myers Squibb Co. for $5 billion.

The maker of Pampers diapers, Charmin bath tissue, Ivory soap and other products said earnings excluding charges and one-time items rose to $1.9 billion, or 84 cents a share, for its fiscal third quarter from $1.5 billion, or 75 cents a share, a year earlier. Wall Street had been expecting 83 cents a share, according to earnings tracker First Call.

Including a $147 million after-tax restructuring charge, the company reported net earnings of $1.04 billion, or 74 cents a share, up from $893 million, or 63 cents, a year earlier.

"January to March was a strong quarter for Procter & Gamble, not only because we achieved our long-term growth rate ahead of schedule...but there's clear evidence that our strategies are working," CEO A.G. Lafley told analysts during a teleconference Tuesday. Lafley is set to become chairman July 1, succeeding John Pepper, who is retiring.

Sales rose to $9.9 billion from $9.1 billion. P&G also said it expects fourth-quarter earnings per share to grow more than 10 percent, and that it will provide a more detailed forecast for fiscal 2003 in August.

Last month, Cincinnati-based P&G raised its guidance for the third quarter, saying it expected to exceed average forecasts at the time of 81 cents a share, and for sales to grow almost 10 percent.

The company said operating cash flow increased by $1.6 billion for the first nine months of the year, reflecting a one-time shift in payment timing.

Chief Financial Officer C.C. Daley told analysts during a conference call Tuesday that increased marketing spending on new products could offset margin gains for the year, and that full-year sales would likely come in at the low end of the company's projected 4 to 6 percent growth range, but said the firm is headed in the right direction.

Merrill Lynch analyst Carol Warner Wilke maintained her "buy" rating on the company Tuesday, saying its core volume growth continues to rebound and margin expansion is accelerating.

"We believe that the company's focus on its big brands and innovation is helping it post more consistent, higher quality results," she said.

The Clairol division helped boost third-quarter sales by 18 percent, the company said. Excluding Clairol, beauty volume grew 4 percent and sales rose just one percent.

Health care sales increased 13 percent driven by strong sales of oral care products such as Crest Whitestrips and Spinbrush.

Baby, feminine and family care posted a 2 percent rise in sales excluding the impact of negative currency transactions, which was led by major brands such as Bounty paper towels, Pampers, Charmin and Puffs tissues.

Food and beverage sales slipped five percent in the quarter, mainly reflecting lower prices on its Folgers coffee brand.  

- from staff and wire reports