Kimberly-Clark's third quarter 2014 earnings of $1.61 per share
exceeded the Zacks Consensus Estimate of $1.54 by 4.5% and grew
11.8% from the year-ago figure of $1.44 per share. Earnings were
boosted by organic sales growth, cost savings and lower share count
owing to share buybacks, which made up for increased input costs,
currency headwinds, higher tax rate and lower net income from
equity companies. Organic sales grew 4% backed by higher sales
volume and selling prices. We are encouraged by the company's
regular innovations, growth initiatives and a strong international
presence that make the stock attractive. However, the company
expects higher input costs in the year end, which may hurt margins.
Nevertheless, after the company's spin-off of its health care
segment, the company will be able to focus on its core consumer and
professional brands. We therefore prefer to remain on the sidelines
with a Neutral recommendation.
Incorporated in Delaware in 1928, Kimberly-Clark Corporation
(KMB) is principally engaged in the manufacture and marketing of a
wide range of health and hygiene products around the world. Most of
these products are made from natural or synthetic fibers using
advanced technologies in fiber, non-wovens and absorbency. The
company sells its products to supermarkets mass merchandisers
drugstores warehouse clubs variety and department stores retail
outlets manufacturing, lodging, office building, food service, and
health care establishments and high volume public facilities.
Based on product grouping, the company conducts its operations
in four business segments namely Personal Care, Consumer Tissue,
K-C Professional & Other and Health Care.
The Personal Care segment includes products like disposable
diapers, training and youth pants, and swim pants baby wipes
feminine and incontinence care products under brands, such as
Huggies, Pull-Ups, Little Swimmers, GoodNites, Kotex, Lightdays,
Depend and Poise.
The Consumer Tissue segment includes bathroom tissue, paper
towels, napkins and related products for household use under brands
such as Kleenex, Scott, Cottonelle, Viva, Andrex, Scottex, Hakle
The K-C Professional & Other segment consists of facial and
bathroom tissue, paper towels, napkins, wipers and a range of
safety products under Kimberly-Clark, Kleenex, Scott, WypAll,
Kimtech, KleenGuard, Kimcare and Jackson brands.
The Health Care segment consists of disposable health care
products, such as surgical drapes and gowns, sterilization wrap,
face masks, exam gloves, digestive health and, respiratory
products, pain management products and other disposable medical
products under Kimberly-Clark, Ballard, ON-Q and other brand
On Nov 15, the board of directors of Kimberly-Clark proposed a
spin-off of its health care business in order to focus on its
consumer and professional brands. The spinoff process is on track
and is expected to be complete on Nov 1, 2014. Post spin-off, the
health care business will become a separate publicly traded company
called Halyard Health.
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