Zacks Analyst Blog Highlights: Kimberly-Clark, Procter & Gamble, J.C. Penney and AFLAC

Business Wire, Feb 27, 2007

CHICAGO -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Kimberly-Clark Corporation (NYSE: KMB), Procter & Gamble (NYSE: PG), J.C. Penney (NYSE: JCP) and AFLAC (NYSE: AFL).

See the latest posts to the Analyst Blog by visiting: http://at.zacks.com/?id=2673

Here are highlights from Monday's Analyst Blog:

Kimberly-Clark Remains a Sell

Kimberly-Clark Corporation (NYSE: 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, weak European operations and competitive pressures are negatively impacting results. Therefore, the stock's rating is a Sell.

In the attempt to balance growth and profitability, management faces many challenges. Despite improving demand, pricing conditions have not fully recovered. Kimberly-Clark operates in highly competitive categories. In the diaper business, the company is facing a significant market share threat from Procter & Gamble (NYSE: PG). Procter has spent heavily on its Pampers training pants line and appears to have an edge over Kimberly-Clark in terms of cost structure and marketing acumen.

In addition, despite the price increases announced in December 2005, private label competitors did not follow the lead. The price increases implemented during the first half of 2006 dampened volume growth not only in the consumer tissue segment but also in the feminine care category.

Good Entry Point for J.C. Penney

We believe J.C. Penney's (NYSE: JCP) business momentum, higher profit margins and stock repurchases bode well for its EPS growth for the next several years. We maintain our Buy rating. Our six-month target price is $95, which is 17 times our 2007 EPS estimate.

Our Buy rating is based on our bullish view of the company's business momentum, improving profit margins and effective use of cash. The company's business momentum is being driven by smart merchandising efforts and strong traffic trends. J.C. Penney is improving the quality and fashion consciousness of its private-label merchandise, avoiding apparel price deflation and further differentiating its merchandise.

The company continues to enjoy strength across all merchandise categories including Internet sales and in its new off-mall concept. The increased fashion appeal of the private brands women's apparel and accessories has boosted sales. The company is capitalizing on its strong momentum by opening new stores.

Brand Strength at AFLAC Priced In

AFLAC's (NYSE: AFL) 4Q06 [fourth quarter of 2006] results came in below our expectations. We question whether the company will be able to meet the high range of its sales goals and EPS [earnings per share] growth guidance. Though we raised our price target, it does incorporate a slightly discounted book-value multiple. While boasting a strong brand name and leading market share, AFLAC generates ROE [return on equity] and earnings growth well above its competitors.

In Japan (which accounts for roughly three quarters of revenues), AFLAC has steadily reducing its benefits ratio. However, if sales in Japan do not accelerate, we believe this will result in a more severe multiple going forward.

AFLAC has historically traded at a premium valuation to other health insurers, reflecting - in our opinion - the company's superior growth prospects, consistent earnings record, superior ROE and strong financial position. However, we believe earnings are slowing to the 13-15% range from 17-18% historically. Although the multiple has slowly contracted since 2002, we think it has room to shrink further to bring it in line with the slower-growing life & health peer group. Our new six-month target price of $50.00 per share, up from $48.00 per share, incorporates a slight discount based on our estimate of an $18.16 book value per share at June 30, 2007.

See the latest posts to the Analyst Blog by visiting http://at.zacks.com/?id=2645

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