Consumer Sector Ideas

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>>> Bear of the Day: Kimberly Clark (KMB)


Zacks

Madeleine Johnson

August 26, 2021


https://finance.yahoo.com/news/bear-day-kimberly-clark-kmb-100810728.html


Founded in 1928, Kimberly Clark Corporation KMB is a well-known global consumer products manufacturer. Its brand portfolio includes Huggies, Pull-Ups, Kleenex, Scott, and Cottonelle.

Q2 Earnings Weaker-Than-Expected

Even though slowing growth was expected this year, Kimberly Clark’s Q2 performance showed a slowdown more intense than management had foreseen.

Organic sales fell 3%, and sales volumes were down 4%. Prices increased only 1%.

Gross profit slumped 17% year-over-year, while net income declined 45% compared to Q2 2020. Cash flow was also down sharply, though KMB’s balance sheet has improved compared to 2019.

"Our second quarter reflects continued pandemic-driven volatility," CEO Mike Hsu said in a press release. "We are facing significantly higher input costs and a reversal in consumer tissue volumes from record growth in the year ago period."

Bottom Line

KMB is now a Zacks Rank #5 (Strong Sell).

Five analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen 68 cents to $6.73 per share. Wall Street has lowered its earnings picture for 2022 as well, but the bottom line is still expected to post year-over-year growth.

Shares have struggled to gain traction so far in 2021. Year-to-date, KMB is down 13.7% compared to the S&P 500’s gain of 31%.

Looking ahead, Kimberly Clark cut its outlook across the board, reflecting 2021’s tough selling environment.

Sales are now expected to fall about 1% for the fiscal year compared to the prior outlook of less than 1% growth. The company’s bottom line will also take a hit as the consumer staples giant tries to balance price hikes against decreasing sales volumes.

The short-term picture for KMB looks pretty gloomy as it tries to find its footing in this stage of the coronavirus pandemic. But for investors, any price pain will be healed by KMB’s juicy dividend, which sports a yield of 3.4%.

Investors who are interested in adding a consumer staples stock to their portfolio could consider online pet food and accessories Chewy CHWY. CHWY is a #1 (Strong Buy) on the Zacks Rank, and the Zacks Consensus Estimate has jumped to $0.12 a share, representing 33.3% growth, for fiscal 2021.


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