Shares of Kimberly-Clark Corp. (KMB, Financial), the company known for products like Huggies and Kleenex, sank more than 5% on Friday on the heels of reporting first-quarter sales that underperformed consensus estimates.
For the quarter ended March 31, the Dallas-based consumer products company reported net income of $584 million, or $1.72 in diluted earnings per share, compared with net income of $660 million, or $1.92 in diluted earnings per share, in the prior-year quarter.
Company reports revenue decline on home inventory and supply chain interruptions
Kimberly-Clark Chairman and CEO Mike Hsu said the company's first-quarter results reflect a "volatile and challenging environment" in which net sales of $4.7 billion declined 5% from the prior-year quarter, including organic sales decline of 8%.
The company saw increased volatility in demand for its products as consumers adapt to the evolving Covid-19 pandemic situation. Although the company saw strong demand in its Consumer Tissue and Personal Care business segments during the "stock up" period in March 2020, demand declined during the first three months of 2021 as consumers resort to existing home inventory products. Hsu further said that the severe weather situations that occurred in the southeastern U.S. during February impeded North American consumer product sales on the back of shutdowns across manufacturing facilities.
GuruFocus ranks Kimberly-Clark's profitability 8 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7 and an operating margin that has increased approximately 7.5% per year on average over the past five years and is outperforming over 88% of global competitors.
Stock falls on sales decline and weakened outlook
Shares of Kimberly-Clark traded at an intraday low of $132.10, down approximately 5.82% from Thursday's close of $140.26. The stock is fairly valued based on Friday's price-to-GF Value ratio of 0.96.
The stock plunged on the back of low sales for the first quarter and weakened outlook for the remainder of 2021: Organic sales growth are expected to increase between 0% and 1%, down from the prior guidance of between 1% and 2%, while adjusted earnings guidance of between $7.30 and $7.55 per share declined approximately 40 cents from the prior guidance, reflecting higher input cost inflation and lower sales volume partially offset by higher net selling prices.
GuruFocus ranks the company's financial strength 4 out of 10: Although the company has a strong Altman Z-score of 3.92, cash-to-debt and debt-to-equity ratios are underperforming more than 85% of global competitors.
Gurus with holdings in Kimberly-Clark include Diamond Hill Capital (Trades, Portfolio), the T Rowe Price Equity Income Fund (Trades, Portfolio), Pioneer Investments (Trades, Portfolio) and Ray Dalio (Trades, Portfolio)'s Bridgewater Associates.
Disclosure: No positions.
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