Kimberly Clark Q2 Earnings Driven By Higher Selling Prices & FORCE Initiative, Though Currency Headwinds Persist

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Trefis
KMB: Kimberly-Clark logo
KMB
Kimberly-Clark

Leading consumer products company Kimberly-Clark (NYSE:KMB) posted its Q2’16 results on July 25th. The company’s net sales came in slightly above analyst estimates but its earnings per share (EPS) beat Wall Street estimate by a wider margin. Kimberly-Clark’s organic sales grew 3% year over year, but due to a 4% currency drag, net sales declined by 1%as reported. Overall, volumes were up 4% year over year, mainly due to economic recovery in certain regions. ((Kimberly Clark Q2 2016 Results))

Up until now, Kimberly Clark was benefiting from weaker currencies and local cost inflation in regions like Latin America, which led to higher raw material costs and consequently higher prices. This might change going forward as the company has guided to an improved currency outlook for the rest of the year. The company anticipates organic sales for 2016 to come in at the lower end of its previously provided guidance, as a result of the improving currency outlook.

kmb-Q2-t1(2)

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See our complete analysis for Kimberly-Clark here

Performance in Terms of Business Segments

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FORCE Initiative Going Strong: Continues to Add to Operating Profits

  • Kimberly Clark has managed to save $95 Million in Q2 through its FORCE (Focused on Reducing Costs Everywhere) initiative.
  • The increased target for FORCE is indicating the strong efficiency in company’s operations which might shield the operating profits in an event of slowdown in world economy as indicated by IMF [1]

The chart below shows our estimates of how Kimberly Clark’s adjusted operating profits may shape in in future.

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap

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Notes:
  1. World Economic Outlook, IMF []