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It has been about a month since the last earnings report for Kimberly-Clark (KMB). Shares have added about 1.9% in that time frame, underperforming 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 catalysts.
Kimberly-Clark Q3 Earnings Miss Estimates, Sales Up Y/Y
Kimberly-Clark reported third-quarter 2021 results. Adjusted earnings came in at $1.62 per share, which fell short of the Zacks Consensus Estimate of $1.66. The bottom line declined from $1.72 per share in the year-ago quarter. Quarterly earnings were hurt by escalated inflation and supply chain disruptions leading to higher-than-anticipated increase in costs.
Kimberly-Clark’s sales came in at $5,010 million, which surpassed the Zacks Consensus Estimate of $5,002.8 million. The metric advanced 7% year over year. Favorable currency movements lifted sales by 1%. The net effect of the Softex Indonesia buyout and business exits related to the company’s 2018 Global Restructuring Program boosted the top line by 2%. Organic sales rose 4%, with net selling prices rising 3% and product mix increasing sales 1%.
In North America, organic sales in consumer products increased 3%, while it jumped 16% in the K-C Professional segment. Outside North America, organic sales went up 6% in developing and emerging (D&E) markets. The metric was in line with the year-ago quarter’s levels across the developed markets.
Adjusted operating profit came in at $745 million, down from $806 million in the year-ago quarter, thanks to a rise in input costs to the tune of $480 million. Increase in pulp and polymer-based materials, distribution as well as energy costs led to a rise in input costs. These were somewhat offset by organic sales growth, reduced marketing, research and general expense as well as cost savings of $115 million and $35 million from the FORCE (Focused On Reducing Costs Everywhere) program and the 2018 Global Restructuring Program, respectively.
Personal Care: Sales of $2,656 million increased 14% year over year. Net selling prices improved 4%, volumes grew 3% while product mix increased 2 points. The net effect of the Softex Indonesia buyout and business exits related to the company’s 2018 Global Restructuring Program aided sales by nearly 3%. Also, favorable currency rates fueled sales by 1%. Sales advanced 11% in North America and 18% in D&E markets. The metric grew 11% across developed markets outside North America, including Australia, South Korea and Western/Central Europe.
Consumer Tissue: Segment sales of $1,541 million fell 5% year over year, including a 1% positive impact from currency rates. Volumes fell 7% reflecting tough comparison stemming from escalated shipments in North America and developed markets in the year-ago quarter owing to spike in demand amid the pandemic. Nevertheless, net selling prices inched up 1%. Sales fell 8% in North America, while it increased 5% in D&E markets. The metric fell 6% in developed markets outside North America.
K-C Professional (KCP): Segment sales gained 13% to $797 million. Volumes were up 6%. Net selling prices rose 5%, while product mix rose slightly. Also, favorable currency rates contributed 1% to sales. Sales jumped 16% in North America, while it grew 14% in D&E markets. The metric increased 3% in developed markets outside North America.
Net sales in 2021 are now expected to grow 1-2% year over year. Earlier, management had anticipated the metric to increase 1-4%. Organic sales are now expected to decline 1-2% compared with flat to 2% down forecasted before. Combined gains from foreign currency translations and the Softex Indonesia buyout net of exited businesses related to the 2018 Global Restructuring Program is likely to improve sales by 3%.
Management now expects adjusted operating profit to decrease 20-22% compared with a 11-14% decline anticipated earlier. Key input costs are now estimated to escalate $1,400-$1,500 million compared with $1,200-$1,300 million projected before. The updated input cost guidance is accountable to higher polymer-based materials, distribution costs and energy rates. On the savings front, management now expects total cost savings of $520-$540 million in 2021, including $390-$400 million from the FORCE program and $130-$140 million from the 2018 Global Restructuring Program. Earlier, Kimberly-Clark expected total savings of $520-$560 million. Finally, the company now envisions 2021 adjusted earnings per share of $6.05-$6.25, down from the previous expectation of $6.65-$6.90. The updated earnings view reflects significant escalated input cost inflation. The metric came in at $7.74 in 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -25.15% due to these changes.
Currently, Kimberly-Clark has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Kimberly-Clark has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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