Could Kimberly-Clark’s Share Price Drop Despite An Expected ~1.65x Growth In EPS?

by Trefis Team
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Kimberly-Clark (NYSE: KMB) is slated to release its Q4 and full-year 2019 results on January 23, 2020. For FY 2019, Trefis estimates that the company will report revenue of $18.4 billion (vs. consensus estimate of $18.4 billion) slightly lower than $18.49 billion in 2018, due to a drop in personal care revenue. Further, we expect the company to report EPS of $6.62 (vs. consensus estimate of $6.87), higher than the $4.05 in 2018, due to a combination of lower share count and lower expenses supporting net income margin.
However, we believe that weaker-than-expected earnings for FY 2019 will very likely result in Kimberly-Clark’s stock falling in price once earnings are announced. In fact, our forecast indicates that Kimberly Clark is valued at $137 a share, which is roughly 5% below its current price of $144.

Trefis shines the spotlight on key assumptions and data for Kimberly-Clark, and our hypothesis lays out one possible set of expectations. You can chime in with your own expectations for Kimberly-Clark’s FY19 earnings in our interactive dashboard.

A] Revenues are expected to be in line with consensus estimates

  • Trefis estimates KMB’s 2019 revenues to be $18.42 billion, in line with consensus estimates of $18.43 billion.
  • Revenue is expected to drop 0.4% from $18.49 billion in 2018 to $18.42 billion in 2019.
  • A drop in Personal Care revenue to nullify growth in KC Professional revenue, leading to a $70 million drop in total revenue.
  • Meanwhile, Consumer Tissue revenue is expected to remain roughly stagnant.

A separate interactive dashboard for Kimberly-Clark provides an in-depth view of Kimberly-Clark’s revenue trend and segment-wise revenue performance, along with the forecast for 2019.

B] EPS likely to miss consensus estimate

  • KMB’s 2019 earnings per share (EPS) is expected to be $6.62 per Trefis analysis, ~5% lower than the consensus estimate of $6.87 per share.
  • EPS expected to increase 63.5% from $4.05 in 2018 to $6.62 in 2019.
  • We forecast KMB’s expenses to drop significantly in 2019, on the back of dropping pulp prices, which will push down COGS.
  • This will result in a ~1.6x growth in KMB’s Net Income Margin figure from 7.6% in 2018 to 12.3% in 2019.

C] Stock price estimate ~5% lower than the market price

  • A trailing P/E multiple of 20.7x looks appropriate for KMB’s stock, as opposed to the current implied P/E multiple of 21.0x.
  • Trefis’ forecast for KMB’s 2019 earnings as well as P/E multiple, are slightly lower than market expectations, working out to a fair value of $137 for KMB’s stock as opposed to the current market price around $144.

Additionally, you can input your estimates for Kimberly-Clark’s key metrics in our interactive dashboard for Kimberly-Clark’s FY19 earnings and see how that will affect the company’s stock price.

See all Trefis Price Estimates and Download Trefis Data here

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