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Kimberly-Clark (KMB) Cost Savings Aid Amid Rising Costs
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Kimberly-Clark Corporation (KMB - Free Report) is undertaking steps to cut costs and enhance supply-chain productivity amid an inflationary environment. The consumer products company is benefiting from the focus on three key strategic growth pillars and the K-C Strategy 2022.
Let’s discuss.
Factors Working Well for Kimberly-Clark
Kimberly-Clark aggressively cuts costs and enhances supply-chain productivity through the Focus on Reducing Costs Everywhere or FORCE Program. The program has been generating solid cost savings for a while, which is driving performance. During the third quarter of 2022, the company generated savings of $80 million from the FORCE program, bringing year-to-date program savings to $175 million. Management is maintaining its cost savings from the FORCE program in the range of $300-$350 million in 2022. Considering the inflationary supply chain environment, management expects savings to be at the lower end of the range.
Kimberly-Clark has been committed to its three key strategic growth pillars — improving core business in developed markets, speeding up growth in the Personal Care segment in developing and emerging markets and enhancing digital and e-commerce capacities. The company expects to meet these objectives through product development across different categories and leveraging capabilities in marketing and sales.
Image Source: Zacks Investment Research
The Zacks Rank #3 (Hold) company has been progressing well with expanding global business. In February 2022, Kimberly-Clark acquired a majority stake in Thinx, Inc. — the pioneer in the reusable period and incontinence underwear category. In October 2020, Kimberly-Clark completed the acquisition of Softex Indonesia — a leading player in the Indonesian personal care market. Recently, the company entered into an agreement to sell its Neve tissue brand in Brazil and related consumer and KCP tissue assets to Suzano. Management expects to conclude the deal during the first half of 2023. The move will allow the company to focus on widening its higher-growth Personal Care business across Brazil while crafting a better future for the Consumer Tissue business across Brazil.
Cost Hurdles on Way
Kimberly-Clark is battling high input costs for the past few quarters. In the third quarter of 2022, the company’s gross margin came in at 30.5%, almost flat compared with the adjusted gross margin reported in the year-ago quarter. Gross margin was affected by major input cost inflation.
Kimberly-Clark reported an adjusted operating profit of $745 million in the third quarter of 2022. The operating profit declined due to a rise in input costs to the tune of $360 million. Reduced volumes, escalated marketing, research and general expenses and unfavorable foreign currency also affected the operating profit. The company expects input cost inflation of $1.4-$1.6 billion for the full year.
While input costs are expected to flare up in 2022, management is focused on undertaking relevant pricing actions to counter inflation and efficiently manage costs.
KMB’s shares have increased 13.2% in the past three months against the industry’s 0.5% decline.
The Chef's Warehouse, which distributes specialty food products, currently sports a Zacks Rank #1 (Strong Buy). Chef's Warehouse has a trailing four-quarter earnings surprise of 93.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CHEF’s current financial year sales suggests growth of 46.5% from the year-ago reported number, while earnings indicate significant growth.
Conagra Brands, operating as a consumer-packaged goods food company, currently carries a Zacks Rank of 2 (Buy). CAG has a trailing four-quarter earnings surprise of 1.8%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial year sales and earnings suggests growth of 5.2% and 3.4%, respectively, from the corresponding year-ago reported figures.
The J. M. Smucker, which manufactures and markets branded food and beverage products, currently carries a Zacks Rank of 2. SJM has a trailing four-quarter earnings surprise of 18.5%, on average.
The Zacks Consensus Estimate for The J. M. Smucker’s current financial-year sales suggests growth of 5.6% from the year-ago reported figure.
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Kimberly-Clark (KMB) Cost Savings Aid Amid Rising Costs
Kimberly-Clark Corporation (KMB - Free Report) is undertaking steps to cut costs and enhance supply-chain productivity amid an inflationary environment. The consumer products company is benefiting from the focus on three key strategic growth pillars and the K-C Strategy 2022.
Let’s discuss.
Factors Working Well for Kimberly-Clark
Kimberly-Clark aggressively cuts costs and enhances supply-chain productivity through the Focus on Reducing Costs Everywhere or FORCE Program. The program has been generating solid cost savings for a while, which is driving performance. During the third quarter of 2022, the company generated savings of $80 million from the FORCE program, bringing year-to-date program savings to $175 million. Management is maintaining its cost savings from the FORCE program in the range of $300-$350 million in 2022. Considering the inflationary supply chain environment, management expects savings to be at the lower end of the range.
Kimberly-Clark has been committed to its three key strategic growth pillars — improving core business in developed markets, speeding up growth in the Personal Care segment in developing and emerging markets and enhancing digital and e-commerce capacities. The company expects to meet these objectives through product development across different categories and leveraging capabilities in marketing and sales.
Image Source: Zacks Investment Research
The Zacks Rank #3 (Hold) company has been progressing well with expanding global business. In February 2022, Kimberly-Clark acquired a majority stake in Thinx, Inc. — the pioneer in the reusable period and incontinence underwear category. In October 2020, Kimberly-Clark completed the acquisition of Softex Indonesia — a leading player in the Indonesian personal care market. Recently, the company entered into an agreement to sell its Neve tissue brand in Brazil and related consumer and KCP tissue assets to Suzano. Management expects to conclude the deal during the first half of 2023. The move will allow the company to focus on widening its higher-growth Personal Care business across Brazil while crafting a better future for the Consumer Tissue business across Brazil.
Cost Hurdles on Way
Kimberly-Clark is battling high input costs for the past few quarters. In the third quarter of 2022, the company’s gross margin came in at 30.5%, almost flat compared with the adjusted gross margin reported in the year-ago quarter. Gross margin was affected by major input cost inflation.
Kimberly-Clark reported an adjusted operating profit of $745 million in the third quarter of 2022. The operating profit declined due to a rise in input costs to the tune of $360 million. Reduced volumes, escalated marketing, research and general expenses and unfavorable foreign currency also affected the operating profit. The company expects input cost inflation of $1.4-$1.6 billion for the full year.
While input costs are expected to flare up in 2022, management is focused on undertaking relevant pricing actions to counter inflation and efficiently manage costs.
KMB’s shares have increased 13.2% in the past three months against the industry’s 0.5% decline.
3 Solid Staple Picks
Some top-ranked stocks are The Chef's Warehouse (CHEF - Free Report) , Conagra Brands (CAG - Free Report) and The J. M. Smucker Company (SJM - Free Report) .
The Chef's Warehouse, which distributes specialty food products, currently sports a Zacks Rank #1 (Strong Buy). Chef's Warehouse has a trailing four-quarter earnings surprise of 93.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CHEF’s current financial year sales suggests growth of 46.5% from the year-ago reported number, while earnings indicate significant growth.
Conagra Brands, operating as a consumer-packaged goods food company, currently carries a Zacks Rank of 2 (Buy). CAG has a trailing four-quarter earnings surprise of 1.8%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial year sales and earnings suggests growth of 5.2% and 3.4%, respectively, from the corresponding year-ago reported figures.
The J. M. Smucker, which manufactures and markets branded food and beverage products, currently carries a Zacks Rank of 2. SJM has a trailing four-quarter earnings surprise of 18.5%, on average.
The Zacks Consensus Estimate for The J. M. Smucker’s current financial-year sales suggests growth of 5.6% from the year-ago reported figure.