Back to top

Why You Should Stay Away from Kimberly-Clark (KMB) Stock

Read MoreHide Full Article

Adding profitable and recommended stocks to your portfolio is a wise decision. Also, disposing of underperforming stocks is equally important in order to safeguard your portfolio returns. Kimberly-Clark Corporation (KMB - Free Report) is one such stock which does not deserve to be part of your investment basket, at least for now.

This Zacks Rank #4 (Sell) stock, which closed at $117.17 on the last trading day, has slumped nearly 8% on a year-to-date basis. Additionally, it has underperformed the Zacks Categorized Consumer Products–Miscellaneous Staples industry, which slipped 1.6%. Let’s delve deeper to find out what’s leading to the bearish run for the stock.

Kimberly-Clark has been witnessing slower organic sales growth, especially in developing and emerging markets, over the past few quarters. Also, currency volatility and higher marketing expenses remain major concerns for the company. These are likely to hurt its profits in the near term.

This manufacturer and marketer of consumer products posted weaker-than-expected results in the third quarter of 2016, wherein both earnings and revenues missed our estimate. Moreover, sales declined on a year-over-year basis due to foreign currency headwinds and lower pricing mix. (Read more: Kimberly-Clark Lags Q3 Earnings, Tightens 2016 View).

Consequently, the company tightened its guidance for 2016. It now expects adjusted earnings per share for the year in the range of $5.95–$6.05, compared with $5.95–$6.15 expected earlier.

Moreover, the stock has been witnessing negative estimate revisions. Over the past 60 days, the Zacks Consensus Estimate of $6.00 and $6.37 for 2016 and 2017, has decreased 10 cents and 17 cents, respectively. Further, the Zacks Consensus Estimate of $1.42 for the fourth quarter of 2016 has declined 8 cents over the same time frame.

KIMBERLY CLARK Price and Consensus


Also, the company faces stiff competition, especially in the diapers segment. Further, its Huggies diapers compete with The Procter & Gamble Company’s (PG - Free Report) cheaper Luvs and upscale Pampers offerings. This has been hurting Kimberly-Clark’s market share.

Stocks that Warrant a Look

Some better-ranked stocks in the same industry include Blue Buffalo Pet Products, Inc. (BUFF - Free Report) and Energizer Holdings, Inc. (ENR - Free Report) , both holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Blue Buffalo Pet Products, with a long-term earnings growth rate of 15.5%, has gained 25.6% year to date.

Energizer Holdings, with a long-term earnings growth rate of 9.1%, has jumped 26.4% year to date.

The Best Place to Start Your Stock Search

Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>

More from Zacks Analyst Blog

You May Like