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Kimberly-Clark (KMB) Q3 Earnings Beat Estimates, Pricing Aids
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Kimberly-Clark Corporation (KMB - Free Report) came out with third-quarter 2023 results, wherein the top and bottom lines increased year over year, and earnings crushed the Zacks Consensus Estimate. The company witnessed organic growth in all segments, along with continued margin improvements. A solid year-to-date show encouraged management to raise its guidance for 2023.
KMB continued to benefit from its commitment to innovation and robust commercial capabilities to boost brand value. Effective implementation of revenue growth management strategies (like pricing) and ongoing productivity initiatives helped fuel the gross margin.
Quarter in Detail
Adjusted earnings came in at $1.74 per share, which comfortably surpassed the Zacks Consensus Estimate of $1.58. The bottom line rose 24% year over year, mainly due to increased adjusted operating profit and equity income gains.
Kimberly-Clark Corporation Price, Consensus and EPS Surprise
Kimberly-Clark’s sales totaled $5,132 million compared with the consensus estimate of $5,135 million. The metric increased 2% compared with the year-ago period’s figure.
Organic sales increased 5% due to a 5% rise in the price as part of the company’s ongoing revenue growth management programs and a 1% impact of the favorable product mix. These were offset by a 1% decline in volumes. Unfavorable foreign currency rates affected sales by nearly 2%, and the divestiture of KMB’s tissue and K-C Professional business in Brazil dented sales by about 1%.
In North America, organic sales rose 7% year over year, which included 9% growth in Personal Care, a 4% increase in Consumer Tissue and a 7% improvement in K-C Professional. Outside North America, organic sales rose 5% in developing and emerging markets while remaining flat year over year in developed markets (Australia, South Korea and Western/Central Europe).
The gross margin expanded 530 basis points (bps) to 35.8%. The upside can be attributed to increased net revenue realization, cost savings and lower input costs. This was partially countered by increased other manufacturing costs and currency headwinds.
The operating profit grew 18% on a greater gross profit, including $90 million of FORCE (Focus on Reducing Costs Everywhere) savings and reduced input costs. These were offset by elevated other manufacturing costs, a planned escalation in marketing, research and general expenses and increased incentive compensation. Adverse currency fluctuations hurt the operating profit by $135 million.
Kimberly-Clark’s operating margin came in at 15.1%, up more than 200 bps compared with the year-ago quarter’s figure of almost 13%. Our model suggested an operating margin increase of around 100 bps.
Segment Details
Personal Care: Segment sales of $2,700 million grew 3% year over year, surpassing our estimate of 1.7% growth. Organic sales rose 7% on a favorable price, mix and volumes. Management highlighted that innovation, strong commercial execution and better supply trends led to volume growth.
Consumer Tissue: Segment sales of $1,567 million dipped 1% year over year. However, impressive revenue growth management and enhanced service levels were upsides. Organic sales increased 2% on favorable pricing. This was somewhat offset by drab volumes.
K-C Professional: Segment sales climbed 2% to $854 million in comparison with our estimate of 3.1% growth. Organic sales jumped 4% on a favorable price and mix. These were somewhat offset by lower volumes. Significant revenue realization and market share expansion in North America were somewhat countered by soft volumes. The demand for the company's innovative solutions in the washroom category remained favorable.
Other Financial Updates
Kimberly-Clark ended the quarter with cash and cash equivalents of $814 million, long-term debt of $7,403 million and total stockholders’ equity of $840 million.
Cash provided by operations was about $2.3 billion year to date. Management incurred capital spending of $549 million in the same time frame. For 2023, KMB projects capital expenditures of approximately $800 million.
Kimberly-Clark concluded share repurchases of 740,000 for $97 million in the first nine months of 2023. It returned $1.3 billion to shareholders via dividends and share buybacks.
Guidance
Organic sales in 2023 are projected to increase 4-5% now compared with the earlier view of 3-5% growth.
Management anticipates net sales growth of 1-2% compared with the earlier range of flat to 2%. Unfavorable foreign currency exchange rates are likely to hurt net sales by 3%. Further, acquisition/divestitures are expected to hurt net sales by around 1% in 2023.
Management expects the operating profit to be affected by input costs to the tune of $50 million. Other manufacturing costs are likely to be a headwind of $250 million. Currency headwinds are likely to lower the 2023 operating profit by about $450 million.
KMB expects FORCE savings of $300-$350 million in 2023. The adjusted operating margin is expected to expand 170 basis points now compared with 150 bps expected earlier.
Finally, Kimberly-Clark envisions 2023 adjusted EPS to increase 15-17% from the adjusted EPS of 2022. Earlier, it was anticipated to increase in the range of 10-14%. The effective tax rate is likely to be in the band of 23-24%.
This Zacks Rank #3 (Hold) stock has declined 7.5% in the past three months compared with the industry’s drop of 20.1%.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 27.8% and 21.8%, respectively, from the year-ago reported numbers.
The J. M. Smucker Company (SJM - Free Report) , a branded food and beverage product company, currently carries a Zacks Rank #2 (Buy). SJM has a trailing four-quarter earnings surprise of 7.3%, on average.
The Zacks Consensus Estimate for J. M. Smucker’s current fiscal-year earnings suggests growth of 8.9% from the corresponding year-ago reported figure.
Post Holdings (POST - Free Report) , a consumer-packaged goods holding company, currently carries a Zacks Rank #2. POST has a trailing four-quarter earnings surprise of 59.6%, on average.
The Zacks Consensus Estimate for Post Holdings’ current fiscal-year sales suggests growth of 13.2% from the corresponding year-ago reported figure.
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Kimberly-Clark (KMB) Q3 Earnings Beat Estimates, Pricing Aids
Kimberly-Clark Corporation (KMB - Free Report) came out with third-quarter 2023 results, wherein the top and bottom lines increased year over year, and earnings crushed the Zacks Consensus Estimate. The company witnessed organic growth in all segments, along with continued margin improvements. A solid year-to-date show encouraged management to raise its guidance for 2023.
KMB continued to benefit from its commitment to innovation and robust commercial capabilities to boost brand value. Effective implementation of revenue growth management strategies (like pricing) and ongoing productivity initiatives helped fuel the gross margin.
Quarter in Detail
Adjusted earnings came in at $1.74 per share, which comfortably surpassed the Zacks Consensus Estimate of $1.58. The bottom line rose 24% year over year, mainly due to increased adjusted operating profit and equity income gains.
Kimberly-Clark Corporation Price, Consensus and EPS Surprise
Kimberly-Clark Corporation price-consensus-eps-surprise-chart | Kimberly-Clark Corporation Quote
Kimberly-Clark’s sales totaled $5,132 million compared with the consensus estimate of $5,135 million. The metric increased 2% compared with the year-ago period’s figure.
Organic sales increased 5% due to a 5% rise in the price as part of the company’s ongoing revenue growth management programs and a 1% impact of the favorable product mix. These were offset by a 1% decline in volumes. Unfavorable foreign currency rates affected sales by nearly 2%, and the divestiture of KMB’s tissue and K-C Professional business in Brazil dented sales by about 1%.
In North America, organic sales rose 7% year over year, which included 9% growth in Personal Care, a 4% increase in Consumer Tissue and a 7% improvement in K-C Professional. Outside North America, organic sales rose 5% in developing and emerging markets while remaining flat year over year in developed markets (Australia, South Korea and Western/Central Europe).
The gross margin expanded 530 basis points (bps) to 35.8%. The upside can be attributed to increased net revenue realization, cost savings and lower input costs. This was partially countered by increased other manufacturing costs and currency headwinds.
The operating profit grew 18% on a greater gross profit, including $90 million of FORCE (Focus on Reducing Costs Everywhere) savings and reduced input costs. These were offset by elevated other manufacturing costs, a planned escalation in marketing, research and general expenses and increased incentive compensation. Adverse currency fluctuations hurt the operating profit by $135 million.
Kimberly-Clark’s operating margin came in at 15.1%, up more than 200 bps compared with the year-ago quarter’s figure of almost 13%. Our model suggested an operating margin increase of around 100 bps.
Segment Details
Personal Care: Segment sales of $2,700 million grew 3% year over year, surpassing our estimate of 1.7% growth. Organic sales rose 7% on a favorable price, mix and volumes. Management highlighted that innovation, strong commercial execution and better supply trends led to volume growth.
Consumer Tissue: Segment sales of $1,567 million dipped 1% year over year. However, impressive revenue growth management and enhanced service levels were upsides. Organic sales increased 2% on favorable pricing. This was somewhat offset by drab volumes.
K-C Professional: Segment sales climbed 2% to $854 million in comparison with our estimate of 3.1% growth. Organic sales jumped 4% on a favorable price and mix. These were somewhat offset by lower volumes. Significant revenue realization and market share expansion in North America were somewhat countered by soft volumes. The demand for the company's innovative solutions in the washroom category remained favorable.
Other Financial Updates
Kimberly-Clark ended the quarter with cash and cash equivalents of $814 million, long-term debt of $7,403 million and total stockholders’ equity of $840 million.
Cash provided by operations was about $2.3 billion year to date. Management incurred capital spending of $549 million in the same time frame. For 2023, KMB projects capital expenditures of approximately $800 million.
Kimberly-Clark concluded share repurchases of 740,000 for $97 million in the first nine months of 2023. It returned $1.3 billion to shareholders via dividends and share buybacks.
Guidance
Organic sales in 2023 are projected to increase 4-5% now compared with the earlier view of 3-5% growth.
Management anticipates net sales growth of 1-2% compared with the earlier range of flat to 2%. Unfavorable foreign currency exchange rates are likely to hurt net sales by 3%. Further, acquisition/divestitures are expected to hurt net sales by around 1% in 2023.
Management expects the operating profit to be affected by input costs to the tune of $50 million. Other manufacturing costs are likely to be a headwind of $250 million. Currency headwinds are likely to lower the 2023 operating profit by about $450 million.
KMB expects FORCE savings of $300-$350 million in 2023. The adjusted operating margin is expected to expand 170 basis points now compared with 150 bps expected earlier.
Finally, Kimberly-Clark envisions 2023 adjusted EPS to increase 15-17% from the adjusted EPS of 2022. Earlier, it was anticipated to increase in the range of 10-14%. The effective tax rate is likely to be in the band of 23-24%.
This Zacks Rank #3 (Hold) stock has declined 7.5% in the past three months compared with the industry’s drop of 20.1%.
3 Solid Consumer Staple Picks
Lamb Weston (LW - Free Report) , which offers frozen potato products, currently sports a Zacks Rank #1 (Strong Buy). LW delivered an earnings surprise of 46.2% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 27.8% and 21.8%, respectively, from the year-ago reported numbers.
The J. M. Smucker Company (SJM - Free Report) , a branded food and beverage product company, currently carries a Zacks Rank #2 (Buy). SJM has a trailing four-quarter earnings surprise of 7.3%, on average.
The Zacks Consensus Estimate for J. M. Smucker’s current fiscal-year earnings suggests growth of 8.9% from the corresponding year-ago reported figure.
Post Holdings (POST - Free Report) , a consumer-packaged goods holding company, currently carries a Zacks Rank #2. POST has a trailing four-quarter earnings surprise of 59.6%, on average.
The Zacks Consensus Estimate for Post Holdings’ current fiscal-year sales suggests growth of 13.2% from the corresponding year-ago reported figure.