Sales expected to remain low
Kimberly-Clark (KMB) exceeded analysts’ sales estimate in the last reported quarter, thanks to higher pricing. However, its sales fell ~1% YoY (year-over-year). We expect Kimberly-Clark’s top line to continue to decline in the first half of 2019 due to currency volatility.
Developing and emerging market sales are expected to remain low—China has continued to see lower volumes and pricing amid tough competition. Currency rates could further subdue sales, and sales in developed markets outside North America are also expected to decline due to currency fluctuation. However, higher pricing is expected to support Kimberly-Clark’s organic sales. Currency volatility is also expected to hurt Procter & Gamble’s (PG), Colgate-Palmolive’s (CL), Church & Dwight’s (CHD), and Clorox’s (CLX) top lines.
Cost and tax headwinds
Kimberly-Clark’s earnings are expected to disappoint this year. Its bottom line is projected to remain low, pressured by lower sales and higher pulp and other raw material costs. Additionally, with the adjusted effective tax rate expected to rise YoY to 23%–25% from 21%, Kimberly-Clark’s EPS could be impacted, limiting upside in its stock.