What Could Hurt Kimberly-Clark’s Top Line?

Consensus estimate

Kimberly-Clark (KMB) is expected to disappoint investors with its sales performance, at least in the near term. We expect Kimberly-Clark’s top line to mark a YoY (year-over-year) fall in the fourth quarter. Its sales are also projected to fall in the first half of 2019.

Kimberly-Clark’s fourth-quarter net sales are expected to take a hit from lower volumes and pricing in China. Adverse currency rates are also expected to remain a drag. Tough YoY comparisons in the first half of 2018 could further affect its sales.

What Could Hurt Kimberly-Clark’s Top Line?

Wall Street analysts expect Kimberly-Clark’s top line to fall 2.7% in the fourth quarter. Meanwhile, KMB’s net sales are expected to mark falls of 4.1% and 1.2%, respectively, in the first two quarters of 2019. In comparison, Wall Street expects the top lines of Colgate-Palmolive (CL) and Procter & Gamble (PG) to remain weak in the coming quarters, reflecting adverse currency rates.

Recent performance

The graph above shows that Kimberly-Clark’s top line performance has deteriorated sequentially. Moreover, its net sales fell 1.8% during its most recently reported quarter. Unfavorable foreign exchange rates and lower volumes negatively impacted the company’s top line. However, its sales came in better than analysts’ expectation supported by higher pricing and a favorable mix.

Kimberly-Clark’s top line is witnessing challenges in developing and emerging markets, which we believe will continue to hurt its sales. Weakness in China and competitive headwinds in its Value segment are expected to pressure its top line.