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Will Cost Pressures Hurt KMB’s Q2 2018 EPS Growth Rate?

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Dec. 4 2020, Updated 10:52 a.m. ET

EPS to improve—but at a slower rate

Analysts expect Kimberly-Clark (KMB) to report adjusted EPS of $1.57 in the second quarter, which reflects a YoY (year-over-year) growth rate of 5.4%. Though the company’s adjusted EPS are projected to improve, the rate of growth is likely to decelerate sequentially.

Analysts expect a low sales growth rate and persisting margin headwinds to affect Kimberly-Clark’s EPS growth rate in the second quarter.

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Factors affecting KMB’s second-quarter EPS

Kimberly-Clark’s second-quarter adjusted EPS are likely to benefit from a significant decline in the effective tax rate. Notably, the bottom lines of other major household and personal care product manufacturers, such as the Clorox Company (CLX), Colgate-Palmolive (CL), and Procter & Gamble (PG), are also expected to benefit from lower taxes.

Coming back to Kimberly-Clark, the company’s EPS are further expected to gain from cost and productivity savings, a fall in interest expenses, and share buybacks. However, weak sales amid a heightened competitive environment and rising costs related to inflation in commodities are expected to restrict its second-quarter EPS growth rate.

During the company’s first-quarter conference call, its management stated that inflation in input costs would have a negative impact of $400 million–$550 million on its financials, up from what it expected earlier.

However, management remains upbeat and expects a double-digit EPS growth rate in 2018 driven by cost-savings, improved pricing in the second half, share repurchases, and a lower effective tax rate.

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