Will Lower Pricing and Higher Costs Keep Hurting KMB?
Analysts expect sales and earnings to improve
Kimberly-Clark (KMB) is expected to announce its 1Q18 results on April 23. Analysts expect the company’s sales to sustain their momentum, led by improvements in volumes. Innovation-led products and brand investments are expected to support sales. Moreover, gains from the India joint venture should further drive net sales growth. However, lower net selling prices—due to promotional spending amid increased competition—are likely to remain a drag.
Meanwhile, analysts expect the company’s bottom line to benefit from lower taxes. Also, cost-savings from its FORCE program and other restructuring initiatives should further cushion its bottom line.
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However, soft category growth rate, lower pricing in the United States, and declining birth rates in South Korea are expected to hurt margins and, in turn, its stock. Moreover, investors remain wary of the fact that driver and carrier shortages and inflation in commodity prices could lead to higher manufacturing and transportation costs. In turn, this could hurt margins.
Kimberly-Clark disappoints with its stock performance
Like most of its peers, Kimberly-Clark stock has mostly disappointed investors so far this year. KMB stock has fallen 12.0% on a YTD (year-to-date) basis as of April 12. Soft demand, increased competition, lower pricing, and cost pressure on margins continue to hurt the stocks of household and personal care product makers in the United States.
During the same period, Procter & Gamble (PG), Clorox (CLX), Colgate-Palmolive (CL), and Church & Dwight (CHD) stocks have fallen 15.3%, 16.2%, 6.0%, and 2.7%, respectively. The benchmark index (SPY) is also trading in the red on a YTD basis.