It has been about a month since the last earnings report for Kimberly-Clark (KMB). Shares have added about 11.5% 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 Q3 Earnings Miss Mark, Sales Rise Y/Y
Kimberly-Clark reported third-quarter 2022 results, with the bottom line declining year over year and missing the Zacks Consensus Estimate. Nevertheless, the top line increased and beat the consensus mark. The company generated organic sales growth across all segments. Management reiterated its 2022 organic sales, net sales and earnings.
Quarter in Detail
Adjusted earnings came in at $1.40 per share, missing the Zacks Consensus Estimate of $1.48. The bottom line declined 14% from $1.62 per share in the year-ago quarter.
Kimberly-Clark’s sales came in at $5,053 million, beating the Zacks Consensus Estimate of $4,985.1 million. The metric inched up 1% year over year. Unfavorable foreign currency rates affected sales by 4%. Organic sales rose 5%, with net selling prices rising 9% and product mix increasing sales by 1%. However, volumes declined 5%.
In North America, organic sales of consumer products fell 2% year over year, while the same increased 5% in the K-C Professional segment. Outside North America, organic sales went up 11% in the developing and emerging (D&E) markets as well as developed markets.
Operating profit came in at $655 million, down from $657 million reported in the year-ago quarter. Kimberly-Clark reported an adjusted operating profit of $745 million in the third quarter of 2022.
The operating profit declined due to a rise in input costs to the tune of $360 million. Reduced volumes, escalated marketing, research and general expenses and unfavorable foreign currency also affected the operating profit. These were somewhat offset by increased net selling prices and cost savings of $80 million from the FORCE (Focused on Reducing Costs Everywhere) program.
Personal Care: Sales of $2,628 million inched down 1% year over year. Net selling prices increased 8%, product mix increased 1% and volume declined 7%. Unfavorable foreign currency rates hurt sales 4%, while the acquisition of the controlling interest in Thinx contributed 1 point to sales. Sales fell 5% in North America but increased 5% in D&E markets. The metric dropped 4% across developed markets outside North America, including Australia, South Korea and Western/Central Europe.
Consumer Tissue: Segment sales of $1,578 million rose 2% year over year. Net selling prices improved sales 9% and volumes fell nearly 3%. Unfavorable currency rates reduced sales 4%. Sales rose 5% in North America, while the metric increased 3% in D&E markets. The metric fell 2% across developed markets outside North America.
K-C Professional (KCP): Segment sales gained 5% to $836 million. Net selling prices increased almost 14%, while the product mix benefited sales by 1 point. Volumes hurt sales by 5% in the segment. Changes in currency rates hurt sales 4%. Sales grew 5% in North America, while the same increased 7% in the D&E markets. The metric grew 5% in the developed markets outside North America.
Other Financial Updates
The company ended the quarter with cash and cash equivalents of $362 million, long-term debt of $7,628 million and total stockholders’ equity of $583 million. Kimberly-Clark generated cash from operating activities of $798 million during the three months ended Sep 30, 2022. Management incurred capital expenditures of $209 million in the quarter under review. The company expects capital spending of $0.9 to $1.0 billion in 2022.
Kimberly-Clark repurchased 192,000 million shares for $25 million in the reported quarter.
Net sales in 2022 are still expected to grow 2-4% from the year-ago reported figure, while organic sales are anticipated to increase 5-7%. Unfavorable foreign currency exchange rates are likely to hurt net sales 3-4%.
Management now expects adjusted operating profit to be down mid-to-high-single digit percent. Earlier, management had expected the metric to be down mid-single digit percent. Kimberly-Clark still envisions 2022 earnings per share (EPS) in the lower end of the $5.60-$6.00 range.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted 8.14% due to these changes.
Currently, Kimberly-Clark has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Kimberly-Clark has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Kimberly-Clark is part of the Zacks Consumer Products - Staples industry. Over the past month, Albertsons Companies, Inc. (ACI), a stock from the same industry, has gained 0.1%. The company reported its results for the quarter ended August 2022 more than a month ago.
Albertsons Companies, Inc. reported revenues of $17.92 billion in the last reported quarter, representing a year-over-year change of +8.6%. EPS of $0.72 for the same period compares with $0.64 a year ago.
Albertsons Companies, Inc. is expected to post earnings of $0.67 per share for the current quarter, representing a year-over-year change of -15.2%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.3%.
Albertsons Companies, Inc. has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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