Kimberly Clark Sinks 7% On 3Q Earnings Miss

Shares of Kimberly Clark fell 6.9% on Thursday after the company missed analysts’ earnings expectations for the third quarter. The company, which owns popular brands like Huggies, Kleenex, Scott, Kotex, posted adjusted EPS of $1.72, which declined 6.5% Y/Y and missed analysts’ estimate of $1.76. COVID-19 related expenses, higher advertising spending and increased general and administrative costs weighed on the bottom line.

Meanwhile, Kimberly Clark’s (KMB) 3Q revenue of $4.68 grew 0.9% Y/Y and exceeded analysts’ forecast of $4.60 billion. Excluding the impact of currency fluctuations, the company’s organic sales grew 3%.

The company’s Consumer Tissue business performed well with sales growth of 9% but sales from the Professional segment fell 16% due to lower demand for washroom products as many offices are continuing work-from-home arrangements. Sales of Personal Care division grew 1%.

Looking ahead, the company upgraded its organic net sales growth outlook for 2020 to 5% from the previous growth forecast of 4% to 5%. It also raised adjusted EPS guidance to the range of $7.50 to $7.65 from the prior range of $7.40 to $7.60.

As part of its Global Restructuring Program, Kimberly Clark expects to exit or divest some low-margin businesses that generate about 1% percent of its overall net sales. The company expects this restructuring to be completed in 2021, with total pre-tax restructuring charges projected at the high end of the range of $1.7 billion to $1.9 billion. It anticipates the restructuring program to generate annual pre-tax cost savings of $500 million to $550 million. (See KMB stock analysis on TipRanks)

On Oct. 16, Berenberg analyst Fulvio Cazzol initiated coverage of Kimberly Clark with a Buy rating and a $181 price target. The analyst stated that the company’s adult incontinence, paper towels and wipes rank best on his framework, which is based on emerging market potential, premiumization, visibility, entry barriers and volatility metrics.

The Street has a cautiously positive Moderate Buy consensus for Kimberly Clark based on 4 Buys, 5 Holds and 1 Sell. With shares up just 0.4% year-to-date, the average analyst price target of $162.70 implies an upside potential of about 18% for the months ahead.  

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