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Can Savings Keep Kimberly-Clark (KMB) Afloat in Q2 Earnings?
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Kimberly-Clark Corporation (KMB - Free Report) is slated to release second-quarter 2018 results on Jul 24. This consumer goods company has a mixed record of earnings surprises in the trailing four quarters. Let’s see how things are placed ahead of the upcoming quarterly results.
Will Cost-Cutting & Other Efforts Fuel Q2 Performance?
Kimberly-Clark has been quite keen on reducing costs through its Focus on Reducing Costs Everywhere program or FORCE. The program has generated higher cost savings each year with a record of $450 million in 2017. During first-quarter 2018, Kimberly-Clark generated savings of $90 million from this program. It projects savings of $400 million in 2018 and more than $1.5 billion will be generated over the four-year period from 2018 to 2021. This can be attributed to management’s focus on enriching productivity at manufacturing facilities, optimizing design and raw material expenses along with attaining distribution efficiencies.
The 2018 Global Restructuring Program is another robust initiative by the company to minimize costs and drive efficiencies. This plan marks its biggest restructuring initiative in a long time and is likely to enhance underlying profitability, help the company to compete better and provide greater flexibility to undertake growth-oriented investments. Notably, management expects cost savings of $50-$70 million from this program in 2018. On a combined basis, Kimberly-Clark expects cost savings of more than $2 billion from the FORCE and 2018 Global Restructuring Programs over the next four years.
Undoubtedly, Kimberly-Clark’s saving-related initiatives are quite impressive and have been playing a vital role in driving profits. We expect that such efforts will boost the bottom-line performance in the upcoming quarterly release. Also, management expects the tax reforms to favorably impact the bottom line and cash flows, which is tailwind for Kimberly Clark in the quarter to be reported. Well, the Zacks Consensus Estimate for the second quarter, which is currently pegged at $1.60, reflects a year-on-year improvement of almost 7%.
Additionally, Kimberly-Clark’s well-spun growth initiatives have been fueling sales across most of markets, as witnessed in the first quarter. For the quarter under review, the consensus estimate for Personal Product and K-C Professional sales are pegged at $2,325 million and $831 million, depicting an increase of 2.4% and 2.6%, respectively. Also, analysts polled by Zacks expect Consumer Tissue sales to grow 2.3% to $1,497 million. Finally, the consensus estimate for Kimberly-Clark’s total revenues is pegged at $4,628 million, marking a rise of 1.6% from a year ago.
Kimberly-Clark Corporation Price, Consensus and EPS Surprise
In spite of robust growth and savings strategies, Kimberly-Clark has been struggling with higher input costs. Evidently, commodity cost inflation of $175 million, stemming from greater costs of pulp and other raw materials caused Kimberly-Clark’s adjusted operating profit to fall 3% in the first quarter of 2018. For 2018, management expects input cost inflation of about $400-$550 million, higher than the previously projected range of $300-$400 million.
Apart from input cost inflation, Kimberly-Clark’s adjusted operating profit has been bearing the brunt of lower net selling prices for a while. In the first quarter, the trend lingered and affected results across most segments. Evidently, lower net selling prices were a hurdle for sales and operating profits of Kimberly-Clark’s Personal Care as well as K-C Professional divisions.
The company is also struggling with strained gross margin, which has been declining year over year on an increased rate for nearly a year now. In the first quarter, gross margin contracted roughly 890 basis points (bps) due to commodity cost inflation and lower selling prices. Prior to this, gross margin witnessed year-over-year contractions of 200 bps, 60 bps and 10 bps in the preceding three quarters, respectively.
All said, it is to be seen if Kimberly-Clark’s cost-savings efforts will offset the aforementioned hurdles. Let’s now take a look at the Zacks Model for the upcoming quarterly announcement.
What the Zacks Model Unveils
Our proven model doesn’t show that Kimberly-Clark is likely to beat bottom-line estimates in the upcoming quarterly results. For this to happen, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Kimberly-Clark has an Earnings ESP of -0.52%. This combined with the company’s Zacks Rank #4 (Sell) makes us less confident regarding an earnings beat.
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat:
The Boston Beer Company, Inc (SAM - Free Report) has an Earnings ESP of +137% and flaunts a Zacks Rank #1.
B&G Foods, Inc (BGS - Free Report) , a Zacks #2 Ranked stock, has an Earnings ESP of +1.58%.
Dean Foods Company , a Zacks #3 Ranked company, has an Earnings ESP of +10.35%.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
Image: Bigstock
Can Savings Keep Kimberly-Clark (KMB) Afloat in Q2 Earnings?
Kimberly-Clark Corporation (KMB - Free Report) is slated to release second-quarter 2018 results on Jul 24. This consumer goods company has a mixed record of earnings surprises in the trailing four quarters. Let’s see how things are placed ahead of the upcoming quarterly results.
Will Cost-Cutting & Other Efforts Fuel Q2 Performance?
Kimberly-Clark has been quite keen on reducing costs through its Focus on Reducing Costs Everywhere program or FORCE. The program has generated higher cost savings each year with a record of $450 million in 2017. During first-quarter 2018, Kimberly-Clark generated savings of $90 million from this program. It projects savings of $400 million in 2018 and more than $1.5 billion will be generated over the four-year period from 2018 to 2021. This can be attributed to management’s focus on enriching productivity at manufacturing facilities, optimizing design and raw material expenses along with attaining distribution efficiencies.
The 2018 Global Restructuring Program is another robust initiative by the company to minimize costs and drive efficiencies. This plan marks its biggest restructuring initiative in a long time and is likely to enhance underlying profitability, help the company to compete better and provide greater flexibility to undertake growth-oriented investments. Notably, management expects cost savings of $50-$70 million from this program in 2018. On a combined basis, Kimberly-Clark expects cost savings of more than $2 billion from the FORCE and 2018 Global Restructuring Programs over the next four years.
Undoubtedly, Kimberly-Clark’s saving-related initiatives are quite impressive and have been playing a vital role in driving profits. We expect that such efforts will boost the bottom-line performance in the upcoming quarterly release. Also, management expects the tax reforms to favorably impact the bottom line and cash flows, which is tailwind for Kimberly Clark in the quarter to be reported. Well, the Zacks Consensus Estimate for the second quarter, which is currently pegged at $1.60, reflects a year-on-year improvement of almost 7%.
Additionally, Kimberly-Clark’s well-spun growth initiatives have been fueling sales across most of markets, as witnessed in the first quarter. For the quarter under review, the consensus estimate for Personal Product and K-C Professional sales are pegged at $2,325 million and $831 million, depicting an increase of 2.4% and 2.6%, respectively. Also, analysts polled by Zacks expect Consumer Tissue sales to grow 2.3% to $1,497 million. Finally, the consensus estimate for Kimberly-Clark’s total revenues is pegged at $4,628 million, marking a rise of 1.6% from a year ago.
Kimberly-Clark Corporation Price, Consensus and EPS Surprise
Kimberly-Clark Corporation Price, Consensus and EPS Surprise | Kimberly-Clark Corporation Quote
Rising Input Costs & Lower Selling Prices Pose Concerns
In spite of robust growth and savings strategies, Kimberly-Clark has been struggling with higher input costs. Evidently, commodity cost inflation of $175 million, stemming from greater costs of pulp and other raw materials caused Kimberly-Clark’s adjusted operating profit to fall 3% in the first quarter of 2018. For 2018, management expects input cost inflation of about $400-$550 million, higher than the previously projected range of $300-$400 million.
Apart from input cost inflation, Kimberly-Clark’s adjusted operating profit has been bearing the brunt of lower net selling prices for a while. In the first quarter, the trend lingered and affected results across most segments. Evidently, lower net selling prices were a hurdle for sales and operating profits of Kimberly-Clark’s Personal Care as well as K-C Professional divisions.
The company is also struggling with strained gross margin, which has been declining year over year on an increased rate for nearly a year now. In the first quarter, gross margin contracted roughly 890 basis points (bps) due to commodity cost inflation and lower selling prices. Prior to this, gross margin witnessed year-over-year contractions of 200 bps, 60 bps and 10 bps in the preceding three quarters, respectively.
All said, it is to be seen if Kimberly-Clark’s cost-savings efforts will offset the aforementioned hurdles. Let’s now take a look at the Zacks Model for the upcoming quarterly announcement.
What the Zacks Model Unveils
Our proven model doesn’t show that Kimberly-Clark is likely to beat bottom-line estimates in the upcoming quarterly results. For this to happen, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Kimberly-Clark has an Earnings ESP of -0.52%. This combined with the company’s Zacks Rank #4 (Sell) makes us less confident regarding an earnings beat.
You can see the complete list of today’s Zacks #1 Rank stocks here
Stocks Poised to Beat Earnings Estimates
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat:
The Boston Beer Company, Inc (SAM - Free Report) has an Earnings ESP of +137% and flaunts a Zacks Rank #1.
B&G Foods, Inc (BGS - Free Report) , a Zacks #2 Ranked stock, has an Earnings ESP of +1.58%.
Dean Foods Company , a Zacks #3 Ranked company, has an Earnings ESP of +10.35%.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>