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Kimberly-Clark (KMB) Q3 Earnings Miss Estimates, Sales Up Y/Y
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Kimberly-Clark Corporation (KMB - Free Report) reported third-quarter 2021 results, with the top line increasing year over year and beating the Zacks Consensus Estimate. The bottom line declined from the year-ago quarter’s reported figure and lagged the consensus mark. The company is encountering significant input cost inflation, which hurt earnings. Management also slashed its sales, adjusted operating profit and earnings per share guidance for 2021.
Quarter in Detail
Adjusted earnings came in at $1.62 per share, which fell short of the Zacks Consensus Estimate of $1.66. The bottom line declined from $1.72 per share in the year-ago quarter. Quarterly earnings were hurt by escalated inflation and supply chain disruptions leading to higher-than-anticipated increase in costs.
Kimberly-Clark’s sales came in at $5,010 million, which surpassed the Zacks Consensus Estimate of $5,002.8 million. The metric advanced 7% year over year. Favorable currency movements lifted sales by 1%. The net effect of the Softex Indonesia buyout and business exits related to the company’s 2018 Global Restructuring Program boosted the top line by 2%. Organic sales rose 4%, with net selling prices rising 3% and product mix increasing sales 1%.
In North America, organic sales in consumer products increased 3%, while it jumped 16% in the K-C Professional segment. Outside North America, organic sales went up 6% in developing and emerging (D&E) markets. The metric was in line with the year-ago quarter’s levels across the developed markets.
KimberlyClark Corporation Price, Consensus and EPS Surprise
Adjusted operating profit came in at $745 million, down from $806 million in the year-ago quarter, thanks to a rise in input costs to the tune of $480 million. Increase in pulp and polymer-based materials, distribution as well as energy costs led to a rise in input costs. These were somewhat offset by organic sales growth, reduced marketing, research and general expense as well as cost savings of $115 million and $35 million from the FORCE (Focused On Reducing Costs Everywhere) program and the 2018 Global Restructuring Program, respectively.
Segment Details
Personal Care: Sales of $2,656 million increased 14% year over year. Net selling prices improved 4%, volumes grew 3% while product mix increased 2 points. The net effect of the Softex Indonesia buyout and business exits related to the company’s 2018 Global Restructuring Program aided sales by nearly 3%. Also, favorable currency rates fueled sales by 1%. Sales advanced 11% in North America and 18% in D&E markets. The metric grew 11% across developed markets outside North America, including Australia, South Korea and Western/Central Europe.
Consumer Tissue: Segment sales of $1,541 million fell 5% year over year, including a 1% positive impact from currency rates. Volumes fell 7% reflecting tough comparison stemming from escalated shipments in North America and developed markets in the year-ago quarter owing to spike in demand amid the pandemic. Nevertheless, net selling prices inched up 1%. Sales fell 8% in North America, while it increased 5% in D&E markets. The metric fell 6% in developed markets outside North America.
K-C Professional (KCP): Segment sales gained 13% to $797 million. Volumes were up 6%. Net selling prices rose 5%, while product mix rose slightly. Also, favorable currency rates contributed 1% to sales. Sales jumped 16% in North America, while it grew 14% in D&E markets. The metric increased 3% in developed markets outside North America.
Other Financial Updates
The company ended the quarter with cash and cash equivalents of $286 million, long-term debt of $7,555 million and total stockholders’ equity of $707 million. Kimberly-Clark generated cash from operating activities of $782 million during three months ended Sep 30, 2021. Management incurred capital expenditures of $235 million. In 2021, the company now expects capital spending of $1,000-$1,100 million compared with $1,100-$1,200 million expected earlier.
Kimberly-Clark repurchased 0.4 million shares for $58 million in the third quarter. In 2021, the company plans to buy back shares worth nearly $400 million at the lower end of the previously-provided guidance of $400-$450 million.
The company is on track with the 2018 Global Restructuring Program, which is focused on lowering its structural costs and improving financial flexibility. As part of this initiative, the company plans to sell or exit some low-margin businesses that deliver about 1% of net sales. Notably, Kimberly-Clark generated cumulative savings of $525 million from this program, until the third quarter of 2021. Management anticipates annual pre-tax cost savings of $550-$560 million from this program by 2021-end.
Image Source: Zacks Investment Research
2021 Outlook
Net sales in 2021 are now expected to grow 1-2% year over year. Earlier, management had anticipated the metric to increase 1-4%. Organic sales are now expected to decline 1-2% compared with flat to 2% down forecasted before. Combined gains from foreign currency translations and the Softex Indonesia buyout net of exited businesses related to the 2018 Global Restructuring Program is likely to improve sales by 3%.
Management now expects adjusted operating profit to decrease 20-22% compared with a 11-14% decline anticipated earlier. Key input costs are now estimated to escalate $1,400-$1,500 million compared with $1,200-$1,300 million projected before. The updated input cost guidance is accountable to higher polymer-based materials, distribution costs and energy rates. On the savings front, management now expects total cost savings of $520-$540 million in 2021, including $390-$400 million from the FORCE program and $130-$140 million from the 2018 Global Restructuring Program. Earlier, Kimberly-Clark expected total savings of $520-$560 million.
Finally, the company now envisions 2021 adjusted earnings per share of $6.05-$6.25, down from the previous expectation of $6.65-$6.90. The updated earnings view reflects significant escalated input cost inflation. The metric came in at $7.74 in 2020.
This Zacks Rank #3 (Hold) stock has lost 1.3% so far this year compared with the industry’s decline of 5.9%.
Edgewell Personal Care Company (EPC - Free Report) , currently carrying a Zacks Rank of 2 (Buy), has a trailing four-quarter earnings surprise of 31.2%, on average.
General Mills, Inc. (GIS - Free Report) , currently carrying a Zacks Rank of 2, has a trailing four-quarter earnings surprise of 7.3%, on average.
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Kimberly-Clark (KMB) Q3 Earnings Miss Estimates, Sales Up Y/Y
Kimberly-Clark Corporation (KMB - Free Report) reported third-quarter 2021 results, with the top line increasing year over year and beating the Zacks Consensus Estimate. The bottom line declined from the year-ago quarter’s reported figure and lagged the consensus mark. The company is encountering significant input cost inflation, which hurt earnings. Management also slashed its sales, adjusted operating profit and earnings per share guidance for 2021.
Quarter in Detail
Adjusted earnings came in at $1.62 per share, which fell short of the Zacks Consensus Estimate of $1.66. The bottom line declined from $1.72 per share in the year-ago quarter. Quarterly earnings were hurt by escalated inflation and supply chain disruptions leading to higher-than-anticipated increase in costs.
Kimberly-Clark’s sales came in at $5,010 million, which surpassed the Zacks Consensus Estimate of $5,002.8 million. The metric advanced 7% year over year. Favorable currency movements lifted sales by 1%. The net effect of the Softex Indonesia buyout and business exits related to the company’s 2018 Global Restructuring Program boosted the top line by 2%. Organic sales rose 4%, with net selling prices rising 3% and product mix increasing sales 1%.
In North America, organic sales in consumer products increased 3%, while it jumped 16% in the K-C Professional segment. Outside North America, organic sales went up 6% in developing and emerging (D&E) markets. The metric was in line with the year-ago quarter’s levels across the developed markets.
KimberlyClark Corporation Price, Consensus and EPS Surprise
KimberlyClark Corporation price-consensus-eps-surprise-chart | KimberlyClark Corporation Quote
Adjusted operating profit came in at $745 million, down from $806 million in the year-ago quarter, thanks to a rise in input costs to the tune of $480 million. Increase in pulp and polymer-based materials, distribution as well as energy costs led to a rise in input costs. These were somewhat offset by organic sales growth, reduced marketing, research and general expense as well as cost savings of $115 million and $35 million from the FORCE (Focused On Reducing Costs Everywhere) program and the 2018 Global Restructuring Program, respectively.
Segment Details
Personal Care: Sales of $2,656 million increased 14% year over year. Net selling prices improved 4%, volumes grew 3% while product mix increased 2 points. The net effect of the Softex Indonesia buyout and business exits related to the company’s 2018 Global Restructuring Program aided sales by nearly 3%. Also, favorable currency rates fueled sales by 1%. Sales advanced 11% in North America and 18% in D&E markets. The metric grew 11% across developed markets outside North America, including Australia, South Korea and Western/Central Europe.
Consumer Tissue: Segment sales of $1,541 million fell 5% year over year, including a 1% positive impact from currency rates. Volumes fell 7% reflecting tough comparison stemming from escalated shipments in North America and developed markets in the year-ago quarter owing to spike in demand amid the pandemic. Nevertheless, net selling prices inched up 1%. Sales fell 8% in North America, while it increased 5% in D&E markets. The metric fell 6% in developed markets outside North America.
K-C Professional (KCP): Segment sales gained 13% to $797 million. Volumes were up 6%. Net selling prices rose 5%, while product mix rose slightly. Also, favorable currency rates contributed 1% to sales. Sales jumped 16% in North America, while it grew 14% in D&E markets. The metric increased 3% in developed markets outside North America.
Other Financial Updates
The company ended the quarter with cash and cash equivalents of $286 million, long-term debt of $7,555 million and total stockholders’ equity of $707 million. Kimberly-Clark generated cash from operating activities of $782 million during three months ended Sep 30, 2021. Management incurred capital expenditures of $235 million. In 2021, the company now expects capital spending of $1,000-$1,100 million compared with $1,100-$1,200 million expected earlier.
Kimberly-Clark repurchased 0.4 million shares for $58 million in the third quarter. In 2021, the company plans to buy back shares worth nearly $400 million at the lower end of the previously-provided guidance of $400-$450 million.
The company is on track with the 2018 Global Restructuring Program, which is focused on lowering its structural costs and improving financial flexibility. As part of this initiative, the company plans to sell or exit some low-margin businesses that deliver about 1% of net sales. Notably, Kimberly-Clark generated cumulative savings of $525 million from this program, until the third quarter of 2021. Management anticipates annual pre-tax cost savings of $550-$560 million from this program by 2021-end.
2021 Outlook
Net sales in 2021 are now expected to grow 1-2% year over year. Earlier, management had anticipated the metric to increase 1-4%. Organic sales are now expected to decline 1-2% compared with flat to 2% down forecasted before. Combined gains from foreign currency translations and the Softex Indonesia buyout net of exited businesses related to the 2018 Global Restructuring Program is likely to improve sales by 3%.
Management now expects adjusted operating profit to decrease 20-22% compared with a 11-14% decline anticipated earlier. Key input costs are now estimated to escalate $1,400-$1,500 million compared with $1,200-$1,300 million projected before. The updated input cost guidance is accountable to higher polymer-based materials, distribution costs and energy rates. On the savings front, management now expects total cost savings of $520-$540 million in 2021, including $390-$400 million from the FORCE program and $130-$140 million from the 2018 Global Restructuring Program. Earlier, Kimberly-Clark expected total savings of $520-$560 million.
Finally, the company now envisions 2021 adjusted earnings per share of $6.05-$6.25, down from the previous expectation of $6.65-$6.90. The updated earnings view reflects significant escalated input cost inflation. The metric came in at $7.74 in 2020.
This Zacks Rank #3 (Hold) stock has lost 1.3% so far this year compared with the industry’s decline of 5.9%.
Top 3 Picks
Albertsons Companies, Inc. (ACI - Free Report) , currently sporting a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 37.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Edgewell Personal Care Company (EPC - Free Report) , currently carrying a Zacks Rank of 2 (Buy), has a trailing four-quarter earnings surprise of 31.2%, on average.
General Mills, Inc. (GIS - Free Report) , currently carrying a Zacks Rank of 2, has a trailing four-quarter earnings surprise of 7.3%, on average.