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By David Berman

Investors were worried about Kimberly-Clark Corp. (NYSE:KMB) on Monday, sending the shares down about 3 per cent in afternoon trading after the release of its first-quarter earnings. The shares are now back to the level they were in 2004, which raises the question whether the sell-off is overdone.

Kimberly-Clark is a classic defensive name, better known for some of its products, like Kleenex and Huggies diapers. The company performed just fine during the financial crisis and recession – babies were born, noses ran – but its exposure to rising commodity prices is raising concerns.

The company said that input cost increases are double what it thought they would be last quarter. While some companies can offset these higher input costs through price increases, investors clearly are not overly confident that Kimberly-Clark is one of them. After all, earnings fell to $1.09 (U.S.) a share from $1.14 last year and shy of the $1.17 a share that analysts’ had been forecasting.

Still, there are several reasons to remain upbeat about the stock. For one, the company believes that price increases and a weak U.S. dollar (nearly half the company’s sales come from outside North America) will drive revenue up 4 per cent to 6 per cent this year, up from an earlier estimate. As well, competitor Procter & Gamble (NYSE:PG) has found itself facing many of the same issues.

Meanwhile, Kimberly-Clark’s stock price might be where it was seven years ago, but little else is at a 2004 level. Consider this: In 2004, Kimberly-Clark paid a quarterly dividend of 40 cents a share; that’s now up to 70 cents – an increase of 75 per cent. In 2004, first quarter-earnings were 91 cents a share on sales of $3.8-billion; now earnings are $1.09 on sales of more than $5-billion. In other words, per-share earnings are up 19.8 per cent and sales are up 31.6 per cent.

And finally, take a look at valuation. In 2004, the shares traded at 18.4-times trailing earnings. Today, they trade at just 13.8-times trailing earnings. That’s certainly cheaper – and possibly cheap.

Disclosure: None