Is Kimberly-Clark Stock Fairly Valued At $135 After A Solid Q1?

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Kimberly-Clark

Kimberly-Clark (NYSE: KMB) recently reported its Q1 results, with revenues and earnings exceeding the street estimates. The company reported revenues of $5.15 billion and adjusted earnings of $2.01 per share, compared to the consensus estimates of $5.09 billion and $1.63, respectively. Not only did the company report an upbeat Q1, it raised its full-year outlook, driving a 5.5% rise in its stock following the Q1 release. In this note, we discuss Kimberly-Clark’s stock performance, key takeaways from its recent results, and valuation.

Firstly, let us look at its stock performance in recent years. KMB stock has seen little change, moving slightly from levels of $135 in early January 2021 to around $136 now, vs. an increase of about 35% for the S&P 500 over this roughly three-year period. Overall, the performance of KMB stock with respect to the index has been lackluster. Returns for the stock were 6% in 2021, -5% in 2022, and -10% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that KMB underperformed the S&P in 2021 and 2023.

In fact, consistently beating the S&P 500 — in good times and bad — has been difficult over recent years for individual stocks; for heavyweights in the Consumer Staples sector including WMT, PG, and COST, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

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Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could KMB face a similar situation as it did in 2021 and 2023 and underperform the S&P over the next 12 months — or will it see a strong jump?  From a valuation perspective, KMB stock looks appropriately priced. We estimate Kimberly-Clark’s Valuation to be $135 per share, close to its current levels of $136. Our forecast is based on a 19x P/E multiple for KMB and expected earnings of $7.10 on a per-share and adjusted basis for the full year 2024. The company expects its earnings to rise in the low teens percentage in 2024 on a constant currency basis.

Kimberly-Clark’s revenue of $5.1 billion in Q1 was up 6% y-o-y on an organic basis, driven by a 4% pricing growth, 1% from a favorable product mix, and volume gains of 1%. The company saw its adjusted operating profit expand by 14% y-o-y to $898 million. This bolstered the company’s bottom line, which stood at $2.01 on a per-share and adjusted basis in Q1’24, up 20% y-o-y. Looking forward, the company expects its organic sales to rise in the mid-single-digits and adjusted operating profit and adjusted earnings per share to rise at a low-teens percentage. This marks an upward revision from its prior guidance of low to mid-single-digit organic sales growth and a high-single-digit growth in earnings.

Overall, Kimberly-Clark posted a robust Q1 and an upward revision in guidance was a big positive for the company. However, we think that after its recent move, the positives are largely priced in now. We believe investors will likely be better off waiting for a dip to enter KMB for better gains in the long run.

While KMB stock looks like it has little room for growth, it is helpful to see how Kimberly-Clark’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Returns Apr 2024
MTD [1]
2024
YTD [1]
2017-24
Total [2]
 KMB Return 5% 12% 19%
 S&P 500 Return -3% 6% 126%
 Trefis Reinforced Value Portfolio -6% 1% 615%

[1] Returns as of 4/24/2024
[2] Cumulative total returns since the end of 2016

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