What Wall Street expects
Kimberly-Clark (KMB) has impressed investors with its bottom-line performance in the past several quarters despite continued weakness in its top line and pressure on margins from higher commodities costs. The graph below shows that Kimberly-Clark has surpassed analysts’ estimates in the past five quarters with an average positive surprise of ~3%. As for the fourth quarter, analysts expect Kimberly-Clark to report adjusted earnings of $1.65 per share, up 5.1% on a YoY basis.
Kimberly-Clark’s fourth-quarter earnings are expected to benefit from a considerable decrease in the adjusted effective tax rate. Plus, share repurchases and an expected decline in the interest expenses should further cushion its earnings growth rate in the fourth quarter.
Analysts expect the bottom lines of the company’s peers also to benefit from the decline in the effective tax rate. Clorox (CLX), Church & Dwight (CHD), and Procter & Gamble are expected to report YoY improvement in their EPS. However, Colgate-Palmolive’s bottom line is projected to decline in the coming quarter, reflecting weak sales and higher raw material, packaging, and shipping costs.
However, weakness in volumes and higher cost of commodities could continue to hurt margins, and in turn, its EPS growth rate. Kimberly-Clark’s adjusted operating profit is projected to decline by about 5% or more in 2018, which is likely to pressure the bottom line.