Kimberly-Clark Corp. (KMB, Financial) released third-quarter results and updated its full-year outlook on Monday.
The company is known for its portfolio of personal care brands that include Kleenex, Scott and Huggies. Founded in 1872 as a paper mill operator, the company has a long history and a presence in over 175 countries. The company, which is headquartered in Irving, Texas, went public in 1928. The company has three business segments, Personal Care, Consumer Tissue and K-C Professional.
In 2014, the company implemented a restructuring program designed to improve organizational efficiency and offset the impact of overhead costs that were the result of a spinoff of the company’s health care business. The program is intended to improve underlying profitability and increase flexibility to invest in growth initiatives, brand building and other objectives. The company expects the restructuring to be complete by the end of 2016.
Kimberly-Clark reported net sales of $4.6 billion decreased about 3% compared to the same quarter a year ago. Sales were reduced by slightly over 2% due to changes in foreign currency exchange rates. Organic sales overall were about even with last year, according to the company. Organic sales in developing and emerging markets increased 3% but were down elsewhere.
Third quarter operating profit increased from $779 million in 2015 to $836 million. According to the company, the 2015 results included the cost of restructuring the company’s operations in Turkey ($17 million) and 2014’s Organization Restructuring costs ($11 million). Adjusted operating profit of $836 million increased 1% compared to $826 million in the same period last year.
The year-over-year operating profit comparison included cost saving measures taken by the company. The company benefitted from $105 million in cost savings from the company’s FORCE (Focus On Reducing Costs Everywhere) program and $15 million in savings from the 2014 Organization Restructuring initiative.
Due to lower fiber costs, input costs decreased $10 million. However, translation effects due to changes in foreign currency exchange rates as well as transaction effects negatively affected operating profit, lowering it by $10 million.
Third quarter diluted net income per share was $1.52, up from $1.41 in 2015. Diluted net income per share through nine months was $4.58, compared to $1.85 in 2015. Third quarter adjusted earnings per share was $1.52, a 1-cent increase from a year ago.
Kimberly-Clark reported cash flow for the third quarter was $948 million, a 12% increase from $849 million a year ago. Capital spending was $185 million in the third quarter. It was $271 million in the same quarter last year.
The company repurchased 1.7 million shares for $225 million in the third quarter. Kimberly-Clark is expecting $750 million in share repurchases for the year. The company’s debt has decreased from $7.8 billion at the end of 2015 to $7.6 billion at the end of September.
The company updated its outlook for the year. Effects from foreign currency rates on net sales and operating profit are expected to be 4% and 3%, as compared to its previous projection of 4% to 5% for each. Organic growth is now expected to be 2%; it was previously projected to be in the 3% to 5% range. Kimberly-Clark expects earnings per share to be $5.95 to $6.05 compared to the previous guidance of $5.95 to $6.15.
"We experienced a more challenging economic and competitive environment in the third quarter,” Thomas J. Falk, chairman and CEO, said. “Nonetheless, our market share positions are broadly healthy. We achieved strong cost savings, improved margins and increased cash flow in the quarter. We also allocated capital in shareholder-friendly ways. Our focus remains on continuing to compete effectively in the near-term as we execute our Global Business Plan strategies for long-term success."
Diamond Hill Capital (Trades, Portfolio) is Kimberly-Clark’s largest shareholder among the gurus with 0.6% of outstanding shares, which is 1.7% of its total assets managed. Other gurus with a position in the company are Paul Tudor Jones (Trades, Portfolio), John Buckingham (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Murray Stahl (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio) and Jim Simons (Trades, Portfolio). In all, 14 gurus hold stock in the company.
The DCF Calculator gives Kimberly-Clark a fair value of $57.57; it was trading at $115.74 on Monday.
Disclosure: I do not own stock in any companies mentioned in the article.
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