Kimberly Clark: Watch the Paper -- Barron's

 |  Includes: CLX, KMB, PG
by: SA Eli Hoffmann

Excerpt from Barron's Weekly Magazine. Receive all our excerpts by signing up here:

Kimberly-Clark by Vito Racanelli

Summary: A jump in Kimberly-Clark Corp. (NYSE:KMB) call options activity last month suggests investors expect higher stock prices ahead. At one point, B. Craig Hutson of bond research firm Gimme Credit notes, trading was about 20x normal volume. Kimberly-Clark bonds have underperformed since September on unconfirmed rumors of an LBO. Shares, meanwhile, are on fire, up 17% in the last six months and outperforming competitors Proctor & Gamble Co. (NYSE:PG) and Clorox Company (NYSE:CLX) despite the latter's better earnings performance. EV (enterprise value) to Ebitda (earnings before interest taxes and depreciation), a key LBO ratio, is still only about 10.5x -- PG's is 13.5 and CLX's is 12. Despite the company's size, Hutson says it could indeed be an LBO target. Other KMB pluses include huge globalization, a healthy cash-flow, a rich dividend, and room to streamline costs and boost revenues. Whether or not Kimberly becomes the target of an LBO (a 20% premium would put it at $41 billion -- the richest LBO ever), Hutson's analysis says the stock is cheap, assuming management can cut costs.
Related Links: LBO Fever -- Barron's Look at Who May Be Next, Riding The New Baby Boom, Jim Cramer's Take on KMB

Kimberly Clark 16 01 2007