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Why Kimberly-Clark’s 3Q17 Results Could Be Disappointing

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Part 5
Why Kimberly-Clark’s 3Q17 Results Could Be Disappointing PART 5 OF 5

What Analysts Recommend for Kimberly-Clark

Analysts remain neutral

Kimberly-Clark’s (KMB) 2H17 results are expected to benefit from new and updated products. Moreover, the company’s focus on reducing costs through the tight control of overhead expenses and a lower effective tax rate is projected to drive its bottom-line growth.

However, analysts remain on the sidelines as continued softness in demand, higher competition, lower pricing, and inflation in commodity prices are anticipated to hurt its financials. 14 out of 15 analysts covering the stock have rated it a “hold,” and only one analyst has provided a “buy” rating. Meanwhile, analysts have a target price of $128.07 per share on KMB stock, implying a potential upside of 8.7% when compared to the closing price of $117.84 on October 11.

What Analysts Recommend for Kimberly-Clark

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In comparison, analysts also maintain a neutral stance on other consumer product companies including Colgate-Palmolive (CL), Procter & Gamble (PG), and Clorox (CLX). Decelerating category growth, increased input costs, and rising competition is expected to restrict the upside of consumer product companies.

Valuation summary

As of October 11, 2017, Kimberly-Clark stock was trading at a forward PE ratio of 18.6x, which is below the peer group average of 23.4x. On the same day, Colgate-Palmolive, Church & Dwight (CHD), Clorox and Procter & Gamble were trading at a forward PE multiple of 24.9x, 23.7x, 23.2x, and 22.0x, respectively.

Despite the company’s low valuation in comparison to its peers, Kimberly-Clark is failing to attract investors owing to its tepid growth rate projection.

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