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Kimberly-Clark (KMB) Up 1.2% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Kimberly-Clark (KMB - Free Report) . Shares have added about 1.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Kimberly-Clark due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Kimberly-Clark Q3 Earnings Miss Estimates, Sales Up Y/Y
Kimberly-Clark reported third-quarter 2020 results, with the top line surpassing the Zacks Consensus Estimate and increasing year over year. However, the bottom line missed the consensus mark and declined from the year-ago quarter’s levels. The quarterly performance reflected sales growth in the Consumer Tissue and Personal Care segment. Also, savings from restructuring plans contributed to the results. However, softness in the K-C Professional unit was a drag.
Quarter in Detail
Adjusted earnings came in at $1.72 per share, which lagged the Zacks Consensus Estimate of $1.76 and decreased 6.5% from $1.84 the year-ago quarter’s figure.
Kimberly-Clark’s sales came in at $4,683 million, which surpassed the Zacks Consensus Estimate of $4,638 million. The top line inched up 1% from $4,640 reported in the year-ago quarter. Unfavorable currency movements put pressure on sales by 2%. Organic sales rose 3% year over year. Volumes rose 2% year over year. Also, combined effect of net selling prices and product mix inched up 1%.
In North America, organic sales in consumer products increased 8% but were down 15% in K-C Professional segment. Internationally, organic sales increased 3% across developed markets and 2% in developing and emerging markets.
Adjusted operating profit came in at $806 million, down from $859 million in the year-ago quarter thanks to rise in other manufacturing costs including coronavirus-related expenses. Also, increase in advertising expenses, escalated general and administrative costs, higher incentive compensation and adverse impacts of unfavorable foreign currency translations caused the downside. Nevertheless, these were somewhat offset by higher organic sales and cost savings of $125 million and $15 million from the FORCE (Focused On Reducing Costs Everywhere) program and the 2018 Global Restructuring Program, respectively. Further, lower input costs stemming from decline in pulp and other raw material costs benefited results.
Segment Details
Personal Care: Sales of $2,339 million increased 1% year over year. Volumes improved 4% while product mix inched up 1%. Also, unfavorable currency rates hurt sales by 4%. Further, sales increased 6% in North America but declined 4% in developing and emerging markets. The metric grew 1% across developed markets outside North America.
Consumer Tissue: Segment sales of $1,623 million rose 9% year over year. Net selling prices were up slightly while volumes increased 10% owing to higher consumer and customer demand amid coronavirus pandemic. However, product mix was unfavorable by 1%. Also, adverse currency movements hurt sales slightly. Sales rose 11% in North America but declined 4% in developing and emerging markets. The metric increased 17% in developed markets outside North America.
K-C Professional (KCP): Segment sales fell 16% to $705 million. Volumes were down 21% owing to coronavirus-led woes. Net selling prices and product mix increased 3% each. Also, currency woes hurt sales slightly. Sales fell 15% in North America and 28% in developing and emerging markets. The metric declined 8% in developed markets outside North America.
Other Financial Updates
The company ended the quarter with cash and cash equivalents of $1,518 million, long-term debt of $7,851 million and stockholders’ equity of $577 million.
Further, Kimberly-Clark generated cash from operating activities of $559 million during the quarter under review. Management incurred capital expenditures of $258 million. Kimberly-Clark repurchased 1.3 million shares for $194 million in the quarter.
2020 Outlook
Management updated its fiscal 2020 outlook. The company forecasts 2020 net sales to grow 2-3% year over year. Earlier it anticipated the metric to increase 1-2% year over year. Further, Kimberly-Clark now projects organic sales improvement of 5% compared with earlier assumption of 4-5% growth. However, currency headwinds are likely to impact net sales by 2-3%. Also, the company expects the net impact of Softex Indonesia acquisition and business exits related to the 2018 Global Restructuring Program to slightly improve sales.
Management anticipates adjusted operating profit growth of 8-10% for the year. Earlier it forecasted the metric to grow 6-9%. The company is on track with the 2018 Global Restructuring Program, which is aimed at lowering the company’s structural costs and improving financial flexibility. Management remains on track to generate pre-tax savings of $500-$550 million from this program by the end of 2021. Although some of these realizations could occur in 2022 due to uncertainties in regard to the coronavirus outbreak. As part of this initiative, the company plans to sell or exit some low-margin businesses that deliver about 1% of net sales.
The company now envisions 2020 adjusted EPS of $7.50-$7.65, which indicates an increase from $6.89 reported in 2019. Prior to this, management expected adjusted EPS in the band of $7.40-$7.60.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
Currently, Kimberly-Clark has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Kimberly-Clark has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Kimberly-Clark (KMB) Up 1.2% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Kimberly-Clark (KMB - Free Report) . Shares have added about 1.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Kimberly-Clark due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Kimberly-Clark Q3 Earnings Miss Estimates, Sales Up Y/Y
Kimberly-Clark reported third-quarter 2020 results, with the top line surpassing the Zacks Consensus Estimate and increasing year over year. However, the bottom line missed the consensus mark and declined from the year-ago quarter’s levels. The quarterly performance reflected sales growth in the Consumer Tissue and Personal Care segment. Also, savings from restructuring plans contributed to the results. However, softness in the K-C Professional unit was a drag.
Quarter in Detail
Adjusted earnings came in at $1.72 per share, which lagged the Zacks Consensus Estimate of $1.76 and decreased 6.5% from $1.84 the year-ago quarter’s figure.
Kimberly-Clark’s sales came in at $4,683 million, which surpassed the Zacks Consensus Estimate of $4,638 million. The top line inched up 1% from $4,640 reported in the year-ago quarter. Unfavorable currency movements put pressure on sales by 2%. Organic sales rose 3% year over year. Volumes rose 2% year over year. Also, combined effect of net selling prices and product mix inched up 1%.
In North America, organic sales in consumer products increased 8% but were down 15% in K-C Professional segment. Internationally, organic sales increased 3% across developed markets and 2% in developing and emerging markets.
Adjusted operating profit came in at $806 million, down from $859 million in the year-ago quarter thanks to rise in other manufacturing costs including coronavirus-related expenses. Also, increase in advertising expenses, escalated general and administrative costs, higher incentive compensation and adverse impacts of unfavorable foreign currency translations caused the downside. Nevertheless, these were somewhat offset by higher organic sales and cost savings of $125 million and $15 million from the FORCE (Focused On Reducing Costs Everywhere) program and the 2018 Global Restructuring Program, respectively. Further, lower input costs stemming from decline in pulp and other raw material costs benefited results.
Segment Details
Personal Care: Sales of $2,339 million increased 1% year over year. Volumes improved 4% while product mix inched up 1%. Also, unfavorable currency rates hurt sales by 4%. Further, sales increased 6% in North America but declined 4% in developing and emerging markets. The metric grew 1% across developed markets outside North America.
Consumer Tissue: Segment sales of $1,623 million rose 9% year over year. Net selling prices were up slightly while volumes increased 10% owing to higher consumer and customer demand amid coronavirus pandemic. However, product mix was unfavorable by 1%. Also, adverse currency movements hurt sales slightly. Sales rose 11% in North America but declined 4% in developing and emerging markets. The metric increased 17% in developed markets outside North America.
K-C Professional (KCP): Segment sales fell 16% to $705 million. Volumes were down 21% owing to coronavirus-led woes. Net selling prices and product mix increased 3% each. Also, currency woes hurt sales slightly. Sales fell 15% in North America and 28% in developing and emerging markets. The metric declined 8% in developed markets outside North America.
Other Financial Updates
The company ended the quarter with cash and cash equivalents of $1,518 million, long-term debt of $7,851 million and stockholders’ equity of $577 million.
Further, Kimberly-Clark generated cash from operating activities of $559 million during the quarter under review. Management incurred capital expenditures of $258 million. Kimberly-Clark repurchased 1.3 million shares for $194 million in the quarter.
2020 Outlook
Management updated its fiscal 2020 outlook. The company forecasts 2020 net sales to grow 2-3% year over year. Earlier it anticipated the metric to increase 1-2% year over year. Further, Kimberly-Clark now projects organic sales improvement of 5% compared with earlier assumption of 4-5% growth. However, currency headwinds are likely to impact net sales by 2-3%. Also, the company expects the net impact of Softex Indonesia acquisition and business exits related to the 2018 Global Restructuring Program to slightly improve sales.
Management anticipates adjusted operating profit growth of 8-10% for the year. Earlier it forecasted the metric to grow 6-9%. The company is on track with the 2018 Global Restructuring Program, which is aimed at lowering the company’s structural costs and improving financial flexibility. Management remains on track to generate pre-tax savings of $500-$550 million from this program by the end of 2021. Although some of these realizations could occur in 2022 due to uncertainties in regard to the coronavirus outbreak. As part of this initiative, the company plans to sell or exit some low-margin businesses that deliver about 1% of net sales.
The company now envisions 2020 adjusted EPS of $7.50-$7.65, which indicates an increase from $6.89 reported in 2019. Prior to this, management expected adjusted EPS in the band of $7.40-$7.60.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
Currently, Kimberly-Clark has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Kimberly-Clark has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.