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Kimberly-Clark Beats Estimates, Raises Guidance

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  • Kimberly-Clark beat second-quarter earnings estimates on stellar organic sales and cost savings.
  • The company’s gross margin expanded on higher pricing and cost savings.
  • Its management has raised its full-year organic sales and adjusted EPS outlook.

On July 23, Kimberly-Clark (KMB) posted stronger-than-expected second-quarter earnings results. The personal care product manufacturer surpassed analysts’ expectations on both the sales and EPS fronts. The company also raised its full-year underlying sales and EPS outlook, which was encouraging.

Kimberly-Clark reported net sales of $4.59 billion, almost flat compared to the previous year’s quarter. However, its revenue came in slightly ahead of analysts’ estimate of $4.54 billion. Unfavorable foreign currency exchange rates and planned exits from underperforming businesses dragged its sales down, and its volumes remained low. 

However, higher net pricing (+5%) and a favorable product mix (+1%) drove its organic sales, which rose 5%. By region, the company’s organic sales increased 5% in North America. Its organic sales jumped 9% in developing and emerging markets and 1% in developed markets.

The company’s adjusted gross profit margin expanded after several quarters of weakness, which is positive. Its second-quarter adjusted gross profit margin expanded about 110 basis points to 34.6%. Higher net selling prices and cost savings supported Kimberly-Clark’s margins during the quarter. Higher gross margins drove its operating margin, which expanded 40 basis points to 17.2%.

Strong organic sales and expanded margins drove the company’s adjusted earnings in the second quarter. Kimberly-Clark posted adjusted EPS of $1.67, higher than analysts’ estimate of $1.61 and up 5% YoY. A lower adjusted effective tax rate and share repurchases cushioned the company’s bottom line.

Improved sales and EPS guidance

Buoyed by a better-than-expected first half, KMB has raised its 2019 underlying sales and adjusted EPS outlook. It now expects its organic sales to increase 3% in 2019 led by higher net selling prices and a favorable product mix. Previously, it expected its organic sales to grow 2%.

Improved organic sales and cost savings are expected to support KMB’s margins in the coming quarters. Input cost inflation is also expected to moderate, supporting the company’s margins.

Kimberly-Clark expects its margin expansion and share repurchases to boost its earnings in the coming quarters. Its management now expects adjusted EPS in the range of $6.65–$6.80. Earlier, it expected adjusted EPS of $6.50–$6.70.

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