BMO Capital Markets has downgraded shares of FMCG giant Procter & Gamble (NYSE: PG) to market perform from outperform, saying that the earnings growth in the second half will be slower than its expectations.

While P&G's new product flow is robust, the dynamic between cost inflation and price increases, rising gas prices and a declining North America birth rate suggest the 2H EPS acceleration will be slower than  we had expected, analyst Connie Maneaty wrote in a note to clients.

P&G recently noted that developed market growth rates have not yet picked up, while higher costs are pressuring the operating margin.

However, the organic sales should still rise 4 percent to 6 percent as developing markets are growing ahead of its expectations and out-of-stocks in Gillette Fusion Pro-Glide and Crest 3D whitening have been resolved.

Yet, P&G won't reach the high end of the range unless developed markets pick up, the analyst said.

Given near-term operating challenges, P&G's outlook for core earnings of $3.91 to $4.01 a share suggests offsets from non-operating items in the second half. As a result, Maneaty cut fiscal 2011 core earnings target by 6 cents to $3.97 a share. Wall Street expects earnings of $3.98 a share, according to analysts polled by Thomson Reuters.

The analyst, who lowered the price target on P&G stock to $70 from $74, also said the developed markets growth was stagnant prior to the 15 percent price spike in WTI crude oil does not bode well near term.

Shares of P&G were down 7 cents to $62.77 in Monday morning trade on the NYSE.