Kimberly-Clark Corp. ( KMB ) has strong consumer brands and is well respected for product innovation, especially in the diaper category. Despite progress on the company’s three cost savings programs (FORCE, the Global Business Plan, and the Strategic Cost Reduction Plan), rising raw material costs, and competitive pressures are constraining earnings growth. The company exhibited operating margin improvement in the latter half of 2006 and 2007, but rising costs of fiber and pulp are now compressing both the gross margin and operating margin expansion. It has repurchased shares, financed in part by the issuance of debt, in an attempt to achieve EPS growth targets. Nevertheless, the stock is upgraded to a Buy based on valuation. Kimberly-Clark stock has traded in a P/E range of 13 to 22 over the last five years. The stock is currently trading at 15.0 times trailing 12-month earnings. The management is spending heavily on marketing and advertising in 2008, which may further compress the operating margin. However, from the current P/E, we expect the stock to outperform the market. The target price of $73 is based on a P/E of 17 times trailing 12-month earnings. Read the full analyst report on KMB "KMB" Free Stock Analysis: Buy? Sell? Hold? Zacks Investment Research