Consumer products giant
) posted fourth quarter 2013 adjusted earnings of $1.44 per
share. Earnings beat the Zacks Consensus Estimate of $1.40 by
2.9% and the year-ago figure of $1.37 by 5.1%. Earnings were
boosted by organic sales growth and, cost savings, which made up
for increased input costs and currency headwinds.
Quarter in Detail
The company reported almost flat sales of $5.305 billion in
the fourth quarter. The results beat the Zacks Consensus Estimate
of $5.25 billion by a slight margin. Improvement in sales volumes
and higher selling prices were offset by foreign currency
headwinds, lost sales in conjunction with European strategic
changes and pulp and tissue restructuring actions.
Excluding the aforementioned headwinds, organic sales grew 5%
from the prior-year quarter, which includes an 11% increase in
the K-C International segment.
Adjusted operating profit (excluding costs for the pulp and
tissue restructuring and European strategic changes) grew 5% to
$836 million in the fourth quarter. This reflects an increase in
organic sales and $75 million of cost savings from the
restructuring program. Unfavorable currency reduced operating
profit by $25 million. Adjusted operating margin also improved 80
basis points to 15.8% in the fourth quarter of 2013.
Full-Year 2013 Results
In 2013, Kimberly-Clark delivered adjusted earnings of $5.77
per share. Earnings beat both the Zacks Consensus Estimate of
$5.73 per share by 0.7% and the year-ago result of $5.25 by 9.9%.
The results also exceeded the company's guided range of
$5.65-$5.75 per share. Earnings were boosted by organic sales
growth and cost savings.
The company's sales were almost flat at $21.2 billion in 2013
and were marginally ahead of the Zacks Consensus Estimate of
$21.1 billion. Improvement in sales volumes and higher selling
prices were offset by foreign currency headwinds, lost sales in
conjunction with European strategic changes and pulp and tissue
restructuring actions. Excluding these headwinds, organic sales
grew 4% from the prior-year.
Personal Care Products:
The segment includes products like disposable diapers, training/
youth/swim pants; baby wipes; feminine and incontinence care
Sales declined 1% on a year-over-year basis to $2.4 billion in
the quarter due to lower sales volume and unfavorable currencies.
However, organic sales volume increased 6%. Only K-C
International region witnessed positive sales growth. Sales in
North America were flat while sales in Europe declined in the
Segment operating profit declined 5% on a year-over-year basis
to $398 million in the quarter due to higher input costs and
unfavorable currencies, which mostly offset the benefits from
organic sales growth and cost savings.
The segment includes bathroom tissue, paper towels, napkins and
related products for household use.
Sales were flat at $1.7 billion in the fourth quarter
attributable to growth in organic sales volumes, favorable
product mix and increase in net selling prices, which offset the
negative impact of currencies, lost sales and restructuring
actions. Both Europe and North America witnessed decline in
sales, while sales in K-C International improved in the
Segment operating profit improved 17% to $275 million as
organic sales growth, cost savings and lower marketing, research
and general expenses were partially offset by input cost
K-C Professional (KCP) & Other:
The segment consists of facial and bathroom tissue, paper towels,
napkins, wipers and a range of safety products.
Sales increased 3% on a year-over-year basis to $0.8 billion
in fourth quarter 2013 owing to positive sales volumes, improved
product mix and higher selling prices. However, these were offset
by unfavorable currency rates. Except Europe, regions of North
America and K-C International witnessed increase in sales. Sales
in Europe were flat in the quarter.
Organic sales and cost savings led to an increase of 8% in
segment operating profit to $149 million. However, these were
offset by higher marketing spending and higher input costs.
The segment consists of disposable health care products.
Sales improved 2% from the prior-year quarter to $0.4 billion
in fourth quarter 2013 as improved sales volume was offset by
unfavorable currency rates. Medical device volumes were up
high-single digits, while surgical and infection prevention
volumes were even with the year-ago levels.
Operating profit was $62 million, up 2% year over year, driven
by organic sales growth, which was offset by higher marketing,
research and general expenses.
As announced in Oct 2012, the company agreed to dissolve the
diaper segment of Western and Central Europe, except the Italian
market. The company has also streamlined its manufacturing
facilities in Europe, which resulted in restructuring costs of
$14 million after tax in the fourth quarter of 2013. In
conjunction with European strategic changes, Kimberly Clark
expects to incur restructuring costs towards the higher end of
the range of $300 to $350 million after-tax through 2014.
Guidance for Full-Year 2014
Kimberly-Clark expects adjusted earnings in the range of
$6.00-$6.20 for 2014, an increase of 4% to 7% from 2013 level.
Net sales are expected to increase in a range of (1%) to 2% for
2014, with organic sales growth of 3% to 5%. The company expects
currency to negatively impact sales by 2% to 3%.
Adjusted operating profit is expected to increase 3% to 7% for
2014, with cost savings of at least $300 million from the
company's FORCE program. The company expects to repurchase shares
of about $1.3 billion to $1.5 billion for 2014. The company's
2014 projections do not include transaction and related costs for
the potential health care business spin-off announced in Nov
2013. This is expected be complete by the end of the third
quarter of 2014.
We appreciate the company's strong brand portfolio and an
enhanced innovation and cost savings program, which helped it to
beat earnings in the fourth quarter of 2013. However, flat sales
signal weakness in the overall consumer spending environment.
Slow recovery of the U.S. economy is denting Kimberly-Clark's
The consumer staples sector has been generally weak over the
past few quarters due to limited spending that emanated from slow
job growth, high interest rates and tightened credit
availability. The company also remains exposed to unfavorable
foreign currency translations as it has a considerable
international presence. The persistently sluggish economic
conditions in Europe also create an overhang. Kimberly-Clark
holds a Zacks Rank #4 (Sell).
Better-ranked stocks in the consumer staples sector include
Post Holdings Inc.
Green Mountain Coffee Roasters Inc
WD 40 Co.
). While Post Holdings and Green Mountain carry a Zacks Rank #1
(Strong Buy), WD 40 Co holds a Zacks Rank #2 (Buy).
GREEN MTN COFFE (GMCR): Free Stock Analysis
KIMBERLY CLARK (KMB): Free Stock Analysis
POST HOLDINGS (POST): Free Stock Analysis
WD 40 CO (WDFC): Free Stock Analysis Report
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