Kimberly-Clark (KMB) stock rose 5.4% on Monday, April 22, after the company released stronger-than-expected first-quarter results. Higher pricing and a favorable mix helped Kimberly-Clark to beat analysts’ sales estimate. Meanwhile, improved organic sales and share repurchases supported the earnings beat. However, both sales and earnings fell on a YoY basis in the first quarter, reflecting adverse currency rates, a volume decline, and a higher effective tax rate.
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We expect currency volatility and inflation in raw and packaging material costs to limit the top and bottom lines of other major CPG (consumer packaged goods) companies including Procter & Gamble (PG), Colgate-Palmolive (CL), Church & Dwight (CHD), and Clorox (CLX). However, higher pricing, innovation, and cost savings are expected to support organic sales and earnings.
We expect Kimberly-Clark’s sales and earnings to improve gradually in the second half of 2019, driven by an increase in pricing, premium innovation, and share buybacks. However, sales and profits are likely to remain pressured in the near term, reflecting weakness in volumes, adverse currency rates, and higher tax.
Including yesterday’s gain, Kimberly-Clark stock is now up 14.3% on a YTD basis as of April 22. Meanwhile, Colgate-Palmolive, Procter & Gamble, and Church & Dwight have risen 16.9%, 15.3%, and 12.2%, respectively. However, Clorox stock is trading roughly flat, reflecting pressure on sales.
In comparison, the S&P 500 has risen by 16.0% so far this year.