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Kimberly-Clark (KMB) Stock Up on Q1 Earnings & Sales Beat

Zacks Equity Research

Kimberly-Clark Corporation KMB 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. We note that the mid-point of $6.60 stands a notch above the current Zacks Consensus Estimate of $6.59.

The better-than-expected performance and impressive earnings outlook seems to have boosted investors’ sentiments. Evidently, shares of the company increased 3.4% during the pre-market trading session.

Though the company is grappling with commodity cost and currency-related headwinds, it is committed toward its restructuring plans to counter the same. In fact, endeavors to reduce costs have helped this Zacks Rank #3 (Hold) stock rally 20.7% in the past six months compared with the industry’s growth of 14.7%.

Kimberly-Clark Corporation Price, Consensus and EPS Surprise

Kimberly-Clark Corporation Price, Consensus and EPS Surprise | Kimberly-Clark Corporation Quote

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%.

Check These Consumer Staples Stocks

Unilever PLC UL, with long-term earnings per share growth rate of 6.1%, flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Church & Dwight CHD, with a Zacks Rank #2 (Buy), has long-term earnings per share growth rate of 8.4%.

Unilever NV UN, another Zacks #2 Ranked stock, has long-term earnings per share growth rate of 6.6%.

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