Kimberly-Clark Saw Sales for Personal Care Items Fall in 2Q

Kimberly-Clark (KMB) has a market cap of $47.7 billion. It fell by 0.23% to close at $132.28 per share on July 26, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -2.1%, 0.92%, and 5.4%, respectively, on the same day. KMB is trading 2.1% below its 20-day moving average, 0.58% above its 50-day moving average, and 4.4% above its 200-day moving average.

The PowerShares DWA Consumer Staples Momentum ETF (PSL) invests 2.0% of its holdings in Kimberly-Clark. The ETF tracks an index of US consumer cyclical companies selected and weighted by price momentum. The YTD price movement of PSL was 3.1% on July 26.

The PowerShares High Yield Equity Dividend Achievers ETF (PEY) invests 1.7% of its holdings in Kimberly-Clark. The ETF aims to track a yield-weighted index of US companies that have increased their annual dividend for at least ten consecutive years.

The market caps of Kimberly-Clark’s competitors are as follows:

• Procter & Gamble (PG): $229.3 billion
• Edgewell Personal Care (EPC): $4.9 billion

Moody’s Investors Service has rated Kimberly-Clark’s proposed $500 million of 30-year senior unsecured notes as “A2.” Moody’s rated the company’s outlook as “stable.” The net proceeds will be used to refinance an outstanding $525 million in commercial paper.

Kimberly-Clark reported 2Q16 net sales of ~$4.58 billion, a fall of 1.2% from the net sales of ~$4.6 billion in 2Q15. Sales from the Personal Care, Consumer Tissue, and K-C Professional segments fell by 1.2%, 0.33%, and 1.9%, respectively, between 2Q15 and 2Q16. The company’s gross profit margin rose by 1.6%. It reported operating income of $838.0 million in 2Q16, compared with -$544.0 million in 2Q15.

Its net income and EPS (earnings per share) rose to $566.0 million and $1.56, respectively, in 2Q16, compared with -$305.0 million and -$0.83, respectively, in 2Q15. It reported non-GAAP (generally accepted accounting principles) EPS of $1.53 in 2Q16, a rise of 8.5% over 2Q15.

KMB’s cash and cash equivalents rose by 6.0% and its inventories fell by 5.3% between 4Q15 and 1Q16. Its current ratio rose to 0.98x in 2Q16, compared with 0.85x in 4Q15. During 2Q16, the company repurchased 1.1 million shares worth of $150 million.

Kimberly-Clark has made the following projections for fiscal 2016:

• negative foreign currency translation on net sales and organic net sales growth at the low end of 3%–5%, which reflects lower expected benefits from selling price increases due to the improved currency outlook
• operating profits in the range of 4%–5%
• cost savings in the range of $350 million–$400 million from its FORCE program
• EPS in the range of $5.92–$6.15 and adjusted EPS in the range of $5.95–$6.15
• share repurchases in the range of $700–$800 million

In the next part of this series, we’ll take a look at Wolverine World Wide.