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

-4.76%
Downside
129
Market
123
Trefis
KMB: Kimberly-Clark logo
KMB
Kimberly-Clark

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.
Relevant Articles
  1. Should You Pick Kimberly-Clark Stock At $120 After A Downbeat Q4?
  2. Is Kimberly-Clark Stock Fully Priced At $120?
  3. Which Is A Better Pick – Kimberly-Clark Stock Or IDEXX Laboratories?
  4. Which Is A Better Consumer Defensive Pick – Kimberly-Clark Or CL Stock?
  5. Is Kimberly-Clark Stock A Better Pick Over Its Industry Peer?
  6. Steady Revenue Growth Has Not Been Reflected In Kimberly-Clark’s Stock Price – Here’s Why

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

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams | Product, R&D, and Marketing Teams