Nothing To Sneeze At Here

Dallas, TX.-based Kimberly-Clark KMB reported second quarter earnings this morning that handily beat Wall Street expectations, despite higher commodity prices for its products. The company reported earnings of $1.18 per share on $5.26 billion in revenues. Wall Street analysts were expecting $1.15 per share on $5.13 billion in revenues. Despite the earnings beat, Kimberly-Clark shares are down a little more than 1% in pre-market trading, as worries over debt concerns at home and abroad continue to persist. Chairman and Chief Executive Officer Thomas J. Falk said, "Our organic sales grew in the second quarter in line with our full-year plan, as we continue to benefit from innovation and targeted growth initiatives. We are gaining market share in a number of businesses and are launching additional product innovations to further improve our brands. We also continue to deliver significant ongoing cost savings and generate strong cash flow. Although adjusted earnings per share were down slightly in the second quarter versus last year, we delivered sequential improvement in most key metrics compared to the first quarter, which gives us added confidence in our performance in the back half of the year." Falk added, "Looking ahead, we will continue to deploy our strategies for long-term success and aggressively manage those factors we control to deliver near-term results. Although the commodity cost environment has worsened over the last three months, we are continuing to target adjusted earnings per share in a range of $4.80 to $5.05 for 2011. We plan to offset the incremental inflationary headwinds we now expect largely through incremental cost savings and overhead reductions, along with favorable currency exchange rates. Nonetheless, without some moderation in input costs, it's more likely that 2011 adjusted earnings per share will be in the lower half of our guidance range." The company said it continues to expect earnings of $4.80 to $5.05 per share this year, but if higher commodity costs continue to persist, earnings could be near the lower end of the range. Savings from the company's FORCE program totaling $300 to $350 million, up from the prior target range of $250 to $300 million. Kimberly-Clark is a defensive name and may allow investors and traders to sleep at night, especially giving the economic uncertainty across the globe. Kimberly-Clark is never going to grow revenues at 20% year-over-year, or invent the next big tech product. That's what the company is. It is a safe, dependable, old-world company that grows earnings and revenues at a 3-5% clip. We've all used Kleenex tissues so much that Kleenex is now a verb in the English language, and when a company's product becomes a verb in the English language, it is a sign that the company is around to stay. See Google GOOG if you do not believe me. While the earnings are never going to grow like the next hot tech company, they are nothing to sneeze at either. If you believe they are, Kimberly-Clark can help you solve that problem. ACTION ITEMS:

Bullish:
Traders who believe that the economy is continuing to go slow or perhaps contract might want to consider the following trades:

• Buying shares of Kimberly-Clark or other consumer staples might be profitable, as the pays a 4.1% dividend and money will seek to come into consumer names like Kimberly-Clark.

• Consider other consumer staples like Procter & Gamble PG and Johnson & Johnson JNJ.

Bearish:
Traders who believe that the economy is likely going to grow faster than many expect may consider alternate positions:

• Short consumer staple names and go long high beta names, such as Baidu BIDU, Apple AAPL and Google GOOG.

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