There was a lot of talk last month about paper products companies such as Kimberly-Clark (NYSE:KMB), Procter & Gamble (NYSE:PG), and Georgia-Pacific (NYSE:GP) being forced to raise prices to cover their rising raw materials costs. But as dire as the situation was sounding, you would not know it from Kimberly-Clark's earnings pre-announcement this morning.

The company previously predicted earnings of $0.85 to $0.87 per share for its first quarter. But Kimberly-Clark now expects its profits will be significantly higher, about $0.91 per share. That is nearly 6% more than everyone was expecting, and a startling 16.7% increase over the first quarter of 2003.

While Kimberly-Clark is still not raising its forecast for 2004 earnings (a prudent decision this early in the year), the company did suggest that analysts look toward the high end of its predicted $3.55 to $3.65 range.

Kimberly-Clark's stock price has barely budged on the news and is still in the neighborhood of $64 per share. At that price, the company sports an enterprise value-to-free cash flow ratio of 20. Pretty respectable for a multinational corporation with strong brands, but not really a bargain if the company's earnings growth slows down over the next five years to meet analyst expectations of 9%. Assuming those expectations play out, the company's EV/FCF/growth ratio is about 2.2, and, indeed, that is slightly more expensive than the market in general.

Given that Kimberly-Clark is already pretty fairly valued then, the market's lack of enthusiasm over a single quarter's earnings growth spurt is not surprising. The more so, since the company appended to its good earnings news a warning that it still anticipates higher raw materials costs to hurt earnings in the second quarter.

One final caveat: Remember that Kimberly-Clark will be raising prices on its products by about 6% in the third quarter. That should help to boost profits despite the higher raw materials costs. And there appears to be little need to worry about competitors undercutting its prices and stealing revenues and market share from the company. One competitor, Georgia-Pacific, has already announced it will be matching and, in some cases, surpassing, Kimberly-Clark's 6% price hike.

Talk over all things Kimberly-Clark on our Kimberly-Clark discussion board.

Fool contributor Rich Smith owns no shares in any of the companies mentioned in this article.