Kimberly-Clark Corporation KMB gains from effective restructuring and cost-saving efforts. Such upsides have propelled the renowned personal care products company’s shares to nearly 13.6% in the past three months compared with the industry’s rise of 10.6%. Let’s take a closer look at the factors that are driving this Zacks Rank #2 (Buy) stock.
Prudent Initiatives to Boost Efficiency
Kimberly-Clark is progressing well with the 2018 Global Restructuring Program, which is one of the biggest restructuring initiatives of the company. The plan focuses on enhancing the company’s underlying profitability by simplifying supply chain and manufacturing structures. During the first quarter of 2019, Kimberly-Clark generated savings of around $60 million from the Global Restructuring Program, taking the cumulative savings to $195 million. Management had earlier projected savings in the range of $100-$125 million from this program in 2019. Moreover, the company continues to expect pre-tax savings of $500-$550 million from this program by the end of 2021. As part of this initiative, the company plans to sell or exit some low-margin businesses that deliver about 1% of net sales, mainly concentrated in the consumer tissue unit.
Kimberly-Clark is aggressively cutting costs and enhancing supply-chain productivity through the Focus on Reducing Costs Everywhere or FORCE. The program has been generating solid cost savings for a while. During the first quarter, the company generated savings of $55 million from this program. For 2019, the company expects savings of $400-$450 million.
Apart from these, Kimberly-Clark is committed toward three key strategic growth pillars. These include focus on improving core business in developed markets, boost growth in the Personal Care segment in developing and emerging markets as well as enhance digital and e-commerce capacities. The company expects to achieve these targets through product development across different categories as well as leverage capabilities in marketing and sales.
Additionally, the company introduced the K-C Strategy 2022 in January 2019. Through the initiative, the company focuses on generating balanced and sustainable growth to return value to shareholders in a tough environment. The program strengthens the company’s brands, through efficient capital allocation and execution of robust cost discipline.
We expect that such well-chalked efforts will enable the company to tide over headwinds emerging from commodity cost inflation and currency fluctuations. That said, we expect the company to further expand business capabilities and remain on growth track.
Looking For More Consumer Staples Stocks? Check These
The Estee Lauder Companies EL, with long-term earnings growth rate of 13%, carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Campbell Soup Company CPB with long-term earnings growth rate of 6%, carries a Zacks Rank #2.
General Mills GIS, with a Zacks Rank #2, has long-term earnings growth rate of 7%.
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