Key Takeaways From Kimberly-Clark’s Q3 Earnings

Kimberly-Clark (NYSE: KMB) reported mixed fiscal third quarter earnings, as its earnings per share came in ahead of market expectations, but revenue missed. Below we highlight some of the most notable items from the earnings release:

• In Q3, the company’s net sales increased 1% year-over-year (y-o-y) to $4.6 billion, primarily due to a slight increase in the organic sales, and a positive impact of foreign currency fluctuations.
• Volumes in the third quarter increased more than 1%, while net selling prices fell about 1%.
• The company witnessed weakness in the Personal Care business, while Consumer Tissues and KC Professional segments grew at 3% y-o-y in this quarter.

• In North America, organic sales fell 3% 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 3% organic sales growth.

•  The company’s gross margin declined by approximately 60 basis points (bps) to 35.8% in Q3, and the operating margin was up 20 bps to 18.4%.
• Kimberly-Clark reported net earnings of $1.60 per share, which came in ahead of analyst estimates in the third quarter. The company benefited from FORCE cost savings of $125 million in this quarter.
• In Personal Care, organic sales fell 2% y-o-y due to lower net selling prices. However, the segment saw a 100 bps improvement in its operating margins in the third quarter, driven by cost savings, partially offset by lower selling prices and higher input costs. In Consumer Tissue, organic sales were up 2% y-o-y, driven by North America. Overall, Consumer Tissue operating margins were 17.1%, down 100 bps, due to higher pulp costs.

• For the full year 2017, Kimberly-Clark continues to expect its organic sales to be similar or slightly up from the prior forecast of 1% to 2% growth. In terms of the 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 weaker-than-expected organic sales in the first nine months of 2017 along with cost inflation.
• The company also expects its full-year spending to be slightly below its $850 million to $950 million target range. In addition, the company expects its full-year dividends and share repurchases to total $2.3 billion.

See our complete analysis for Kimberly-Clark here

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