Kimberly-Clark Corp. (KMB) Monday posted a 5 percent rise in third-quarter profit as higher tissue prices helped counter increased raw material costs and price competition in diapers and training pants.

The maker of Kleenex tissues, Huggies diapers and Pull-Ups (search) training pants said the price competition would remain intense, and its shares fell 2.8 percent.

"Cost savings programs continue to drive returns and cash flow growth, but high pulp prices and heavy competition in diapers worldwide are limiting (earnings-per-share) upside," Deutsche Bank analyst Andrew Shore said in a note. He maintained a "buy" rating and $72 price target on the shares.

Third-quarter net income rose to $441.3 million, or 89 cents per share, from $419.7 million, or 83 cents, a year earlier.

Analysts' average earnings estimate for Dallas-based Kimberly-Clark was 90 cents per share, according to Reuters Estimates.

Third-quarter sales rose 6 percent to $3.866 billion, just above analysts' mean expectation of $3.85 billion. Volume rose 3 percent and the weak dollar added 2 percentage points to sales growth.

The company's year-earlier earnings were 85 cents a share before unusual items.

Kimberly-Clark said more cost cutting should help offset higher raw material and energy costs, while price competition in diapers and training paints should remain intense.

It forecast fourth-quarter earnings of 89 cents to 91 cents per share, including costs of 4 cents to 5 cents per share for exiting certain pulp and paper operations. Analysts expect a profit of 93 cents to 96 cents, with a mean target of 95 cents, excluding such costs.

With its fourth-quarter forecast, Kimberly-Clark stood by its earlier forecast for full-year earnings of $3.55 to $3.65 per share. In July it forecast earnings at the high end of that range. Analysts on average expect $3.66 per share.

The company still expects volume growth in line with its long-term target of 3 percent to 5 percent.

It raised its planned 2004 share repurchases by $200 million to $1.6 billion, as free cash flow climbed.

It lowered its capital spending target for the year to about $500 million, citing productivity gains. Its previous forecast was $600 million to $650 million.

Kimberly-Clark shares fell $1.76, or 2.8 percent, to $61.30 on the New York Stock Exchange (search).