Why has Kimberly-Clark (KMB) lost 2.8% since its last earnings report?

It’s been about a month since Kimberly-Clark’s (KMB) last earnings report. Shares have lost about 2.8% in that time, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Kimberly-Clark due for a breakout? Before we dive into the recent reaction from investors and analysts, let’s take a quick look at the company’s most recent earnings report in order to get a better handle on the important factors influencing the situation.

Kimberly-Clark tops first-quarter earnings estimates, up for ’24

Kimberly-Clark reported first-quarter 2024 earnings, and earnings rose year over year and beat the Zacks Consensus Estimate. The upper limit also exceeded the consensus level, but declined year over year. Given the strong start to fiscal 2024, management raised its annual guidance.

Quarter in detail

Adjusted earnings per share came in at $2.01, topping the Zacks Consensus Estimate of $1.61. The bottom line increased by 20% year-on-year, driven by higher adjusted operating profit. Positive factors included lower net interest, effective tax rate and increased capital gains.

Kimberly-Clark’s total sales were $5,149 million, topping the consensus estimate of $5,075.8 million. The indicator decreased by 1% compared to the data from the previous period. Unfavorable foreign exchange rates impacted sales by almost 5%, and the divestiture of KMB’s tissue and KC Professional businesses in Brazil reduced sales by approximately 1%.

Organic sales increased 6% on a 4% price increase driven by pricing actions taken to contain increased local costs in hyperinflationary economies, especially across Argentina. Product mix and volume were favorable by 1% each, with strength in North America, developing and emerging markets (D&E) and developed markets.

In North America, organic sales increased 3% year-over-year, which included 2% growth in Personal Care and 6% growth in Consumer Tissue. These were slightly offset by a 1% drop in KC Professional.

Outside North America, organic sales in developing and emerging markets increased by 15%. In developed markets (Australia, South Korea and Western/Central Europe), the rate decreased by 2%.

Gross margin increased 390 basis points (bps) to 37.1%. The positive impact can be attributed to organic growth and gross productivity increases. However, cost inflation, mainly in emerging markets and supply chain investments, remained a concern.

Operating profit was $853 million, compared to $787 million reported in the same quarter last year. Adjusted operating profit increased 14% despite a 12 percentage point unfavorable currency translation impact resulting from economic hyperinflation.

The story continues

Segment details

Personal hygiene: Segment sales of $2,713 million were flat year-over-year, exceeding our estimate of a 0.6% decline. Organic sales increased by 10% thanks to favorable prices, range and volumes. Management highlighted that innovation, good commercial execution and better supply trends led to volume growth.

Consumer tissue: Segment sales of $1,599 million decreased 2% year-over-year. The downside can be attributed to disinvestments and withdrawal from business. Our model suggested a 5.7% decline in sales in this segment. Organic sales remained stable year over year.

KC Professional: Segment sales decreased 3% to $823 million due to divestitures and exits. Our model suggested a 5.3% decline in sales in this segment. Organic sales increased by 2%. Favorable price execution and product mix counteracted the reduction in volumes.

Other financial updates

Kimberly-Clark ended the quarter with cash and cash equivalents of $853 million, long-term debt of $7,161 million and total equity of $1,184 million.

Cash provided by operating activities was $438 million for the three months ended March 31, 2024. Management incurred capital expenditures of $194 million during the same period. It returned $452 million to shareholders through dividends and share repurchases.

Guidelines 2024

Management now expects organic net sales to grow in the mid-single digits, compared to prior guidance of low-to-mid single-digit growth. The reported increase in net sales is likely to reflect an unfavorable currency impact of almost 400 basis points and an unfavorable impact from divestitures of 120 basis points.

Adjusted operating profit is expected to grow in 2024 at a rate of several digits per cm3. Previously, the company had projected this metric to grow on a per cc basis at a high single-digit or low double-digit rate. Adjusted EPS is now expected to grow at a mid-teens percent pace on a cc basis compared to previous expectations for high single-digit growth.

How have estimates changed since then?

It turns out that new estimates have been trending upwards over the past month.

VGM results

At this point, Kimberly-Clark has a great Growth Score of A, although it lags in the Momentum Score with an F. However, the stock is given a grade of C on the value side, ranking in the middle 20% for this investment strategy.

Overall, the stock has a Total VGM Score of C. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company generally show an upward trend, and the scale of these corrections looks promising. Notably, Kimberly-Clark carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

Industry player performance

Kimberly-Clark belongs to the Zacks Consumer Products – Staples industry. Another company in the same industry, Albertsons Companies, Inc. (ACI), has gained 2.7% over the past month. More than a month has passed since the company announced its results for the quarter ended February 2024.

In the most recent quarter, Albertsons Companies reported revenue of $18.34 billion, representing a year-over-year change of +0.4%. EPS of $0.54 for the same period compared to $0.79 a year ago.

Albertsons Companies is expected to report earnings per share of $0.68 for the current quarter, which would represent a year-over-year change of -26.9%. Over the past 30 days, the Zacks Consensus Estimate has moved -17.5%.

Albertsons Companies earns a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Rating of A.

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