It has been about a month since the last earnings report for Kimberly-Clark (KMB Quick QuoteKMB - Free Report) . Shares have lost about 2.4% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Kimberly-Clark due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Kimberly-Clark Ups View on Q2 Earnings & Sales Beat

Kimberly-Clark came out with robust second-quarter 2023 results, with the top and bottom lines beating the Zacks Consensus Estimate and increasing year over year. Results continued to gain from revenue growth management efforts.

Management raised its organic sales, operating margin and adjusted EPS growth targets for 2023 while keeping the net sales growth guidance unchanged. Further, the company’s enhanced gross margin places it well to make investments in premium brand value proposals (such as innovation). This is likely to help Kimberly-Clark increase market share over time. During the quarter, Kimberly-Clark concluded the divestiture of its Brazil tissue assets (in June).

Quarter in Detail

Adjusted earnings came in at $1.65 per share, which surpassed the Zacks Consensus Estimate of $1.48. The bottom line rose 23% year over year, mainly due to increased adjusted operating profit, together with equity income gains and reduced income taxes.

Kimberly-Clark’s sales totaled $5,134 million, beating the consensus estimate of $5,112 million. The metric increased 1% compared with the year-ago period’s figure.

Organic sales increased 5%, with 9% growth in price and a favorable product mix stemming from ongoing revenue growth management programs. These were offset by a 3% decline in volumes. Unfavorable foreign currency rates affected sales by nearly 4%.

In North America, organic sales rose 6% year over year, which included 1% growth in Personal Care, a 7% increase in Consumer Tissue and a 17% improvement in K-C Professional. Outside North America, organic sales rose 6% in developing and emerging markets while increasing 4% in developed markets (Australia, South Korea and Western/Central Europe).

The adjusted gross margin expanded 380 basis points (bps) to 34% compared with our estimate of 31%. The upside can be attributed to increased net revenue realization and cost savings. This was partially countered by increased input costs to the tune of $30 million.

The adjusted operating profit grew 17% on a greater gross profit, including $80 million of FORCE (Focus on Reducing Costs Everywhere) savings. These were offset by marketing, research and general expenses. Adverse currency fluctuations hurt the operating profit by $100 million. Kimberly-Clark’s adjusted operating margin came in at 14.2%, up 190 bps compared with the year-ago quarter’s figure. Our estimate for the adjusted operating margin stood at 12.8%.

Segment Details

Personal Care: Segment sales of $2,685 million decreased 1% year over year, while it surpassed our estimate of $2,611.9 million. Organic sales rose 4% on a favorable price and mix, somewhat offset by reduced volumes. Management highlighted that robust revenue growth management and commercial execution led to positive trends in net revenue realization.

Consumer Tissue: Segment sales of $1,549 million rose 1% year over year compared with our estimate of $1,555 million. Impressive revenue growth management and enhanced service levels led to sales growth. Organic sales increased 4% on favorable pricing. This was somewhat offset by drab volumes.

K-C Professional: Segment sales advanced 11% to $887 million in comparison with our estimate of $819.2 million. Organic sales jumped 13% on a favorable price and mix. These were somewhat offset by lower volumes. The company witnessed growth across key categories and regions, especially North America.

Other Financial Updates

Kimberly-Clark ended the quarter with cash and cash equivalents of $580 million, long-term debt of $7,947 million and total stockholders’ equity of $651 million. Kimberly-Clark generated cash from operations of $1,400 million during the six months ended Jun 30. Management incurred capital spending of $389 million in the same time frame. Kimberly-Clark concluded its share repurchases of 485,000 for $65 million in the first half of 2023. Management projected share buybacks in the band of $100-$150 million for 2023.

Guidance

Organic sales are projected to increase 3-5%, up from the earlier view of 2-4% growth. Management anticipates 2023 net sales growth of flat to 2%. Unfavorable foreign currency exchange rates are likely to hurt net sales by 2%. Further, acquisition/divestitures are expected to hurt net sales by 1% in 2023. Management expects operating profit to be affected by input costs of $100 million. Currency headwinds are likely to lower the 2023 operating profit by $300-$400 million. Kimberly-Clark envisions 2023 adjusted EPS to increase 10-14% from that reported in 2022. Earlier, it was anticipated to increase 6-10%. The effective tax rate is likely to be 23-25%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, Kimberly-Clark has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Kimberly-Clark has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.