Consumer Staples Like Kimberly-Clark Fall Hard

Like competitor Procter & Gamble, the Kleenex maker is facing a nasty price war, so earnings beats aren't helping much

Author's Avatar
Apr 23, 2018
Article's Main Image

Kimberly-Clark (KMB, Financial) scraped below the bottom of its 52-week low after a first-quarter sales beat failed to impress investors.

The Dallas-based consumer goods giant reported adjusted earnings per share of $1.71, in line with a consensus of five estimates. Sales for the quarter of $4.76 billion were slightly above forecasts of $4.6 billion. Kimberly-Clark also has the distinction of being among an elite group of companies that have consistently increased dividends for over 25 years.

This quarter was no different as the company announced it was returning $550 million to shareholders in dividends and share repurchases. But it wasn't enough for Wall Street, at least for the moment.

A weakening stock price and failure to grow significant earnings drew poor results, records showed. Shares slid more than 2% in early afternoon trading to barely over $98 a share. It set a new low, compared to the 52-week range of $98.53 to $134.30.


The stock fell 24% over the last 12 months, according to GuruFocus. That compares to a gain of more than 13% for the Standard & Poor's 500 over the same period of time.

The company’s struggles can be blamed, in large part, to a continuing price war that has required the consumer goods sector to slash prices. Manufacturers also have had to pony up millions more in expenses to buy raw materials used to produce Kleenex tissues and diapers.

Ohio-based Procter & Gamble (PG, Financial), which is facing similar challenges, also saw its stock fall amid a solid earnings beat last week. In Monday trading, P&G was down over 1.13% to under $73 a share. It has seen its stock price take a dive of 19% in the last 12 months. Barron's said the consumer good sector lost 1.7% as a whole on Friday, and was the day's worst-performing sector.


Kimberly-Clark announced today it has responded to the headwinds by implementing a program, known as FORCE, Focused on Reducing Costs Everywhere, which provided $90 million in savings. It also said it was involved in a large-scale corporate restructuring program that is expected to produce a pre-tax cost savings of $500 million to $550 million by 2021. It also has reported more than 5,000 layoffs.

Financial data

Competition in the consumer products arena is fierce as other companies, like Walmart (WMT, Financial), have also resorted to deep discounting to lure customers. Amazon (AMZN, Financial) also adds pressure to the mix.

Kimberly-Clark saw some of its worst operating profits in the first quarter of the year. It reported an operating profit of $847 million a year ago. In the first quarter of 2018, it reported $247 million, a drop of 71%. Net income in the first quarter stood at $93 million, compared to $575 million a year ago. That was a decline of 83%.

The company said changes in foreign currency exchange rates benefited sales by 3% worldwide. For example, organic sales improved by 2% as volumes increased by 3% while net selling prices were down 1%. Outside North America, organic sales rose 2% in developed markets and 1% in developing and emerging markets. Changes in currency rates benefited the company's sales numbers.

Revenue growth and share repurchases

Over time, the company has seen a diminished revenue growth. Over the last five years, it reported 0.50% growth in revenue per share. It has seen 1.9% over the last 12 months.


The company has a market cap of $34 billion. GuruFocus ranks it a 5 out of 10 in financial strength and a 7 out of 10 in profitability and growth.

Kimberly-Clark reported earnings before income, taxes, depreciation and amortization of $11 a share in December 2017, compared to EBITDA of $6 a share 15 years ago.


The stock price is above the median under the Peter Lynch chart's median price.


First-quarter share repurchases were 1.8 million shares at a cost of $204 million. Total debt was $7.7 billion as of March 31. Cash provided by operations was $542 million in the first quarter.

The company is estimating 2018 diluted earnings per share in the range of $6.90 to $7.20 per share.

It sells products in more than 175 countries.