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Will Kimberly-Clark's Impressive Momentum Continue in 2020?

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Kimberly-Clark Corporation KMB looks well poised to sustain previous year’s momentum in 2020, courtesy of restructuring efforts and focus on innovation. Moreover, the company is committed toward its three key strategic growth pillars.

These factors have enabled Kimberly-Clark to deliver strong earnings trend and boost investors’ optimism despite weakness in K-C Professional (or KCP) business and rising costs. Markedly, this Zacks Rank #3 (Hold) stock has jumped 24.3% in the past year against the industry’s decline of 8.3%.

Strategies to Drive Growth

Kimberly-Clark has been undertaking initiatives to save costs for a while. This is evident from the 2018 Global Restructuring Program and Focus on Reducing Costs Everywhere or FORCE Program.

The 2018 Global Restructuring Program, which is the company’s biggest restructuring plan, focuses on enhancing its profitability by simplifying the supply chain and manufacturing structures. This enables Kimberly-Clark compete better and provides it greater flexibility to undertake growth-oriented investments.

Until the third quarter of 2019, the company generated cumulative savings worth $260 million from the 2018 Global Restructuring Program. In fact, management anticipates a pre-tax savings of $500-$550 million from this program by the end of 2021, backed by production supply-chain efficiencies and reduction in workforce. This apart, Kimberly-Clark is on track with cutting costs and enhancing supply chain productivity via its FORCE Program. The plan has been yielding impressively for a while. During the third quarter, Kimberly-Clark generated savings of $95 million from the FORCE and 2018 Global Restructuring Program (on a combined basis).

Further, the company has been progressing well with its focus on three key strategic growth pillars — improving core business in the developed markets, accelerating growth of Personal Care segment in developing and emerging markets as well as enhancing digital and e-commerce capacities.

Additionally, management introduced the K-C Strategy 2022 in January 2019 that generates balanced and sustainable growth as well as boosts shareholders’ value amid a tough environment. Apart from this, the company has been focusing on innovation, particularly in the training pant category to drive growth.

Will Kimberly-Clark Overcome Hurdles?

Kimberly-Clark’s KCP segment has been witnessing dismal sales performance for a while. Also, rising input cost and SG&A expenses are concerns. To top it all, the company is exposed to unfavorable foreign currency translations due to international presence.

Nonetheless, we believe that the company is leaving no stone unturned to offset these challenges with its aforementioned initiatives. In fact, the company’s continued solid performance and a positive outlook have heightened analysts’ optimism in the stock. Evidently, the Zacks Consensus Estimate for fourth-quarter 2019 earnings, which is scheduled to release in January, has inched up by a cent to $1.70 per share in the past 30 days.

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