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What Could Hurt Kimberly-Clark Stock?

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Analysts’ recommendations

Among 19 analysts covering Kimberly-Clark (KMB) stock, 13 analysts recommend a “hold,” four analysts recommend a “sell,” and two analysts recommend a “buy” rating. Analysts have a consensus target price of $106.29 per share on Kimberly-Clark stock, which indicates a downside of 6.0% based on its closing price of $113.07 on September 26.

Kimberly-Clark stock trades at 17.0x the 2018 estimated EPS of $6.66 and at 16.2x the 2019 estimated EPS of $7.00—neither look attractive given the projected growth rates of 6.9% and 5.1% during those periods.

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Near-term headwinds

Kimberly-Clark’s near-term organic sales are expected to remain low due to lower net price realization and increased competition. Meanwhile, negative currency rates could pressure the top-line growth. The low birth rate in South Korea is expected to remain a drag. Although the company’s management recently announced increased pricing in the North American consumer product business, the benefits aren’t expected to support the near-term sales and margins.

Analysts expect the company’s margins to remain weak, which reflects the inflation in raw material prices and higher transportation costs. Also, the company’s move to raise prices might hurt its volumes. Low-priced private label products are gaining traction.

Kimberly-Clark’s management lowered its 2018 earnings outlook, which implies near-term pressure on its profitability. Kimberly-Clark’s 2018 adjusted earnings are expected to be $6.60–$6.80 per share—down from the previous guidance range of $6.90–$7.20.

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