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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.

Q3 Earnings Weaker-Than-Expected

Even though slowing growth was expected this year, Kimberly Clark’s latest quarterly performance continued to show and intense slowdown in business.

Organic sales did rise 4% (an improvement from last quarter’s 3% decline), but sales volumes were roughly flat and prices increased by 3%.

However, price hikes weren’t enough to offset soaring costs, and operating profit declined, gross margin took a hit, and net income fell 1% to $469 million

"Our third quarter results reflect a dynamic and challenging macro environment," CEO Mike Hsu said in a press release. While management was happy with KMB’s results, it said that supply chain challenges and inventory pressures heavily impacted the company in Q3.

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 57 cents to $6.16 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 has lost 0.7% compared to the S&P 500’s gain of 24.7%.

Looking ahead, Kimberly Clark cut its outlook across the board, reflecting 2021’s tough selling environment.

Earnings are now expected to fall between $6.05 and $6.25 per share for 2021, down from the previous forecast range of $6.25 to $6.65 per share, and Kimberly-Clark is still anticipating a modest revenue drop this year as well. Management also expects supply chain and cost concerns to linger, impacting its stock buyback spending.

The short-term picture for KMB looks pretty gloomy as it tries to find its footing in this stage of the coronavirus pandemic. But for investors, any price pain will be healed by KMB’s juicy dividend, which sports a yield of 3.4%.

Investors who are interested in adding a consumer staples stock to their portfolio could consider Schick and Wet Ones maker Edgewell Personal Care (EPC - Free Report) . EPC is a #2 (Buy) on the Zacks Rank, and the Zacks Consensus Estimate has jumped to $3.06 share, representing 1.32% growth, for the current fiscal year.


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