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Can Savings & Brand Initiatives Revive Kimberly-Clark in 2019
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Kimberly-Clark Corporation (KMB - Free Report) , a renowned personal care products company is on track with well-chalked savings initiatives as well as efforts to improve brand position through innovation and category expansion. However, unfavorable currency translations are a drag. Also, strained gross margins, stemming from escalating input costs, are posing hurdles. Such aspects have dented investors’ optimism, evident from the stock’s 2.5% decline on a year-to-date basis, compared with the industry’s fall of 7.4%
Let’s delve into the aspects impacting the performance of this Zacks Rank #3 (Hold) company and see if the stock can revive in 2019.
Savings Initiatives & Efforts to Boost Brand Strength
Kimberly-Clark is undertaking robust initiatives to curtail costs. Through its Focus on Reducing Costs Everywhere or FORCE program, the company is generating higher cost savings each year with record savings of $450 million in 2017. Management expects to generate cost savings of $425-450 million from this program in 2018. The company anticipates savings of more than $1.5 billion over the four-year period from 2018 to 2021. The projections were driven by management’s focus on enriching productivity at manufacturing facilities, optimizing design and raw material expenses as well as attaining distribution efficiencies.
Among other efforts to manage costs, the 2018 Global Restructuring Program is noteworthy. The plan is likely to enhance the company’s underlying profits, enable it to compete better and provide greater flexibility to undertake growth-oriented investments. Management had stated that it projects savings in the range of $100-$120 million from this program in 2018. On a combined basis, Kimberly-Clark expects cost savings of more than $2 billion from the FORCE program and 2018 Global Restructuring Program over the next four years.
Apart from making cost-containment endeavors, Kimberly-Clark strives to improve brand positions and market share. The company continues to stay focused on innovation, particularly in the training pant category, to drive growth. Further, the company plans to innovate products under categories like tissues, Huggies baby wipes, Poise pads and Depend underwear. Additionally, the company focuses on improving its core business in the developed markets, accelerate growth in the Personal Care segment in developing and emerging markets as well as enhance digital and e-commerce capacities.
Will Efforts Counter Headwinds in 2019?
Higher input costs have been troubling Kimberly-Clark for a while now. This caused a 250-basis points slump in adjusted gross margin during third-quarter 2018. Moreover, commodity cost inflation of $210 million, stemming from greater costs of pulp and other raw materials, weighed on adjusted operating profit in the said period. Further, management expects input cost inflation for 2018 in the upper end of the earlier projection of roughly $675-$775 million.
Apart from this, the company is exposed to unfavorable foreign currency translations as it has a considerable international presence. In fact, during the third quarter, unfavorable currency movements weighed on sales by 3%. Also, competitive activity in the diaper category is a hurdle.
While persistence of such headwinds is a viable threat to the company’s performance, we expect the aforementioned growth drivers to provide some cushion. That said, we expect such efforts to help revive the stock’s performance in 2019.
Looking for More Consumer Staples Stocks? Check These
McCormick & Company, Incorporated (MKC - Free Report) has long-term EPS growth rate of 9% and a Zacks Rank #2.
Lamb Weston (LW - Free Report) , also with a Zacks Rank #2, has long-term EPS growth rate of 11.8%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Can Savings & Brand Initiatives Revive Kimberly-Clark in 2019
Kimberly-Clark Corporation (KMB - Free Report) , a renowned personal care products company is on track with well-chalked savings initiatives as well as efforts to improve brand position through innovation and category expansion. However, unfavorable currency translations are a drag. Also, strained gross margins, stemming from escalating input costs, are posing hurdles. Such aspects have dented investors’ optimism, evident from the stock’s 2.5% decline on a year-to-date basis, compared with the industry’s fall of 7.4%
Let’s delve into the aspects impacting the performance of this Zacks Rank #3 (Hold) company and see if the stock can revive in 2019.
Savings Initiatives & Efforts to Boost Brand Strength
Kimberly-Clark is undertaking robust initiatives to curtail costs. Through its Focus on Reducing Costs Everywhere or FORCE program, the company is generating higher cost savings each year with record savings of $450 million in 2017. Management expects to generate cost savings of $425-450 million from this program in 2018. The company anticipates savings of more than $1.5 billion over the four-year period from 2018 to 2021. The projections were driven by management’s focus on enriching productivity at manufacturing facilities, optimizing design and raw material expenses as well as attaining distribution efficiencies.
Among other efforts to manage costs, the 2018 Global Restructuring Program is noteworthy. The plan is likely to enhance the company’s underlying profits, enable it to compete better and provide greater flexibility to undertake growth-oriented investments. Management had stated that it projects savings in the range of $100-$120 million from this program in 2018. On a combined basis, Kimberly-Clark expects cost savings of more than $2 billion from the FORCE program and 2018 Global Restructuring Program over the next four years.
Apart from making cost-containment endeavors, Kimberly-Clark strives to improve brand positions and market share. The company continues to stay focused on innovation, particularly in the training pant category, to drive growth. Further, the company plans to innovate products under categories like tissues, Huggies baby wipes, Poise pads and Depend underwear. Additionally, the company focuses on improving its core business in the developed markets, accelerate growth in the Personal Care segment in developing and emerging markets as well as enhance digital and e-commerce capacities.
Will Efforts Counter Headwinds in 2019?
Higher input costs have been troubling Kimberly-Clark for a while now. This caused a 250-basis points slump in adjusted gross margin during third-quarter 2018. Moreover, commodity cost inflation of $210 million, stemming from greater costs of pulp and other raw materials, weighed on adjusted operating profit in the said period. Further, management expects input cost inflation for 2018 in the upper end of the earlier projection of roughly $675-$775 million.
Apart from this, the company is exposed to unfavorable foreign currency translations as it has a considerable international presence. In fact, during the third quarter, unfavorable currency movements weighed on sales by 3%. Also, competitive activity in the diaper category is a hurdle.
While persistence of such headwinds is a viable threat to the company’s performance, we expect the aforementioned growth drivers to provide some cushion. That said, we expect such efforts to help revive the stock’s performance in 2019.
Looking for More Consumer Staples Stocks? Check These
Chefs’ Warehouse (CHEF - Free Report) , with long-term earnings per share (EPS) growth rate of 19%, carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
McCormick & Company, Incorporated (MKC - Free Report) has long-term EPS growth rate of 9% and a Zacks Rank #2.
Lamb Weston (LW - Free Report) , also with a Zacks Rank #2, has long-term EPS growth rate of 11.8%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>