Here’s How Analysts Reacted to Kimberly-Clark’s 1Q18 Results



A couple of analysts lowered price target

Kimberly-Clark (KMB) reported an improved sales and earnings performance in 1Q18. The company surpassed analysts’ expectations both on the sales and EPS fronts. However, continued pressure on margins, promotional spending to drive volumes, and lower pricing remained a drag and continued to hurt its margins. The company’s gross margin fell significantly in 1Q18, which prompted a couple of analysts to lower the target price on Kimberly-Clark stock. Jefferies lowered its price target to $102 per share from $110. Meanwhile, Wells Fargo reduced its target price on KMB stock to $92 from $100.

Kimberly-Clark’s volumes improved in 1Q18. However, improvement in volumes came at the cost of margins, reflecting increased promotional spending. Plus, inflation in commodities continues to pressure margins, keeping analysts on the sidelines.

Kimberly-Clark expects innovation-led product launches and favorable currency rates to support its sales growth rate in 2018. However, a tough operating environment in North America, increased competition in China, and low birth rates in South Korea are anticipated to restrict the upside in sales.

Moreover, inflation in commodities is expected to offset the benefits from improvement in net pricing and productivity and cost savings.

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Ratings and price target

About 69.0% of the 16 analysts covering Kimberly-Clark stock maintain a “hold” recommendation, 19.0% suggest a “buy,” and 12.0% maintain a “hold” rating. Analysts have a price target of $111.80 per share on KMB stock, which is 13.5% higher than its closing price of $98.52 on April 23.

Given the soft sales environment and persisting pressure on margins, analysts also maintain a “hold” recommendation on the company’s peers including Procter & Gamble (PG), Church & Dwight (CHD), Clorox (CLX), and Colgate-Palmolive (CL).


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