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Bear of the Day: Kimberly-Clark (KMB)

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Founded in 1928, Kimberly-Clark Corporation (KMB - Free Report) is a well-known global consumer products manufacturer. Its brand portfolio includes Huggies, Pull-Ups, Kleenex, Scott, and Cottonelle.

Q1 Earnings Weaker-Than-Expected

Kimberly-Clark reported a sharp decline in growth and sales volume in the first quarter. Organic sales slumped 8% over the prior-year period to $4.7 billion, a stark shift from last quarter’s 5% increase.

Management attributed this to tough year-over-year comparisons, when tissue paper and toilet paper were flying off the shelves, as well as weather-related shipping and manufacturing disruptions. Right now, people just aren’t stocking up on essentials like they were in the beginning of the pandemic.

Sales in North America fell 7%, and volumes dropped about 7%, driven by supply chain disruptions, and were down in all major product categories.

Expenses ended up outpacing revenue to kick off the fiscal year, and as a result, operating income dropped to $770 million, or 16.2% of sales.

Bottom Line

KMB is now a Zacks Rank #5 (Strong Sell).

Five analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen 48 cents to $7.41 per share. Wall Street has lowered its earnings picture for 2022 as well, but the bottom line is still expected to post year-over-year growth.

Shares have struggled to gain traction so far in 2021. Year-to-date, KMB is down 0.36% compared to the S&P 500’s gain of 11.2%.

Looking ahead, Kimberly-Clark now expects total sales to rise by less than 1% for the year, down from the previous forecast of gains between 1% and 2%; adjusted profits are expected to fall in the range of 3% to 6%.

Management, however, is still optimistic that the business will be back on track by the end of 2021. And for investors, any price pain will be healed by KMB’s juice dividend, which sports a yield of 3.4%.

Investors who are interested in adding a consumer staples stock to their portfolio could consider Paper Mate and Sharpie maker Newell Brands (NWL - Free Report) . NWL is a #2 (Buy) on the Zacks Rank, and the Zacks Consensus Estimate has jumped 9 cents to $1.73 a share for fiscal 2021.

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