Kimberly-Clark (KMB) Up 3.6% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Kimberly-Clark (KMB). Shares have added about 3.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Kimberly-Clark due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Kimberly-Clark Q1 Earnings & Sales Beat Estimates
Kimberly-Clark reported first-quarter 2019 results, wherein both top and bottom lines beat the Zacks Consensus Estimate. Also, the company continues to envision adjusted earnings per share for 2019 to be $6.50-$6.70.
Quarter in Detail
The quarterly adjusted earnings of $1.66 per share came ahead the Zacks Consensus Estimate of $1.54. However, adjusted earnings dropped close to 3% year over year.
Notably, adjusted effective tax rate in the quarter was 23.7% compared with 22% in the year-ago quarter.
Kimberly-Clark’s sales came in at $4,633 million, which surpassed the Zacks Consensus Estimate of $4,486 million. However, the top line inched down roughly 2% from the year-ago period. Unfavorable currency movements weighed on sales by 5%. Organic sales rose 3% year over year, owing to improved net selling prices and product mix, somewhat offset by a drop in volumes.
Within North America, organic sales in consumer products and K-C Professional rose 1% each. Internationally, organic sales increased 7% across developing and emerging markets, while it grew 1% in developed markets.
Adjusted operating profit came in at $807 million, down from $824 million in the year-ago quarter. Results were hurt by higher input costs to the tune of about $135 million, stemming from increased prices of pulp and other raw materials. Also, unfavorable currency translations and increased advertising expenses negatively impacted adjusted operating profit.
Nevertheless, these downsides were somewhat compensated by improved net selling prices, and cost savings of $55 million and $60 million from the Focused On Reducing Costs Everywhere (FORCE) program and the 2018 Global Restructuring Program, respectively.
Segment Details
Personal Care Products: Segment sales of $2,275 million declined roughly 1%, thanks to unfavorable currency rates, which were partly cushioned by improved net selling prices, volumes and product mix. Further, sales increased in North America, while it declined across developing and emerging markets as well as developed markets outside North America.
Consumer Tissue: Segment sales declined 3% year over year to $1,526 million, as adverse currency movements and volume declines couldn’t be compensated by net selling prices. Segment sales declined across all regions.
K-C Professional (KCP): Segment sales dipped 2% to $817 million due to adverse currency rates, reduced volumes and several businesses exits as part of the 2018 Global Restructuring Plan. This was somewhat cushioned by improved product mix and higher net selling prices. Sales remained flat in North America, while the same declined in emerging and developing markets along with developed markets outside North America.
Other Financial Updates
The company ended the quarter with cash and cash equivalents of $491 million, long-term debt of $5,990 million and total stockholders' deficit of $82 million.
Further, Kimberly-Clark generated cash flow of $317 million from operating activities during the first quarter. Management incurred capital expenditures of $316 million.
During the quarter, Kimberly-Clark bought back 1.4 million shares for approximately $167 million, while it returned around $510 million to shareholders through dividends and share buybacks.
Other Developments
Management is on track with the 2018 Global Restructuring Program, which is its biggest restructuring plan in a long time. During the first quarter, pre-tax restructuring charges under the initiative amounted to $152 million, which took the cumulative pre-tax charges to $1,188 million. Further, cumulative savings from the program came in at $60 million during the quarter, taking the cumulative savings to $195 million. Additionally, Kimberly-Clark is strongly focused on its K-C Strategy 2022.
Guidance
Management is pleased with the company’s performance, wherein improved net selling prices helped it battle hurdles related to currency fluctuations and commodity prices. Also, Kimberly-Clark focused on innovations, undertook growth-oriented actions and made brand investments. Management reaffirmed its outlook for 2019, wherein organic sales are anticipated to grow 2%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, Kimberly-Clark has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Kimberly-Clark has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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