Key Takeaways From Kimberly-Clark’s Q2 Earnings

by Trefis Team
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Kimberly-Clark (NYSE:KMB) reported mixed fiscal second quarter earnings, as its earnings per share came in line with expectations, but revenue missed.

  • In Q2, the company’s net sales declined 1% year-over-year (y-o-y) to $4.6 billion, primarily due to lower organic sales, which reflected a challenging growth environment. The company also saw a difficult comparison to last year’s results.
  • The company’s organic sales fell 1% y-o-y amid intense competition and low volumes growth from developed markets. In North America, organic sales fell by 2% y-o-y, due to category softness, lower promotional shipments, and higher competitive activity. However, emerging markets remained an area of strength for the company, registering a 2% organic sales growth.

  • The company witnessed significant category weakness in the second quarter, and reported flat revenue growth in the Personal Care and KC Professional segment, while Consumer Tissues revenue declined 2% y-o-y.

  •  The company’s gross margin declined by approximately 20 basis points (bps) to 36.1% in Q2, and the operating margin was down 50 bps to 17.5%.
  • Kimberly-Clark reported net earnings of $1.49 per share, which came in line with analyst estimates in the second quarter. The company benefitted from the FORCE cost savings of $120 million in this quarter.
  • In Personal Care, organic sales fell 1% y-o-y due to lower net selling prices. However, the segment saw a 60 bps improvement in its operating margins in the second quarter, driven by cost savings, partially offset by lower selling prices and higher input costs. In Consumer Tissue, organic sales were down 2% y-o-y, driven by North America. Overall, Consumer Tissue operating margins were 16.5%, down 190 bps, due to lower sales and higher pulp costs.

For full year 2017, Kimberly-Clark expects its organic sales to be similar or slightly up from the prior forecast of 1% to 2% growth. In terms of bottom line, the company expects its earnings per share to be at the low end of the target range of $6.20 to $6.35. This lower guidance is driven by weak organic sales in the first half of 2017 along with cost inflation.

See our complete analysis for Kimberly-Clark here

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