We reaffirm our Neutral recommendation on
) following appraisal of its fourth quarter 2012 results.
Why the Reiteration?
Kimberly-Clark posted healthy fourth quarter 2012 earnings of
$1.37 per share, beating the Zacks Consensus Estimate by 0.7% and
the prior-year quarter earnings by 7.0%. Bottom-line growth was
boosted by organic sales growth of 5% which was driven by volume
growth and improved pricing. Strong performance internationally
drove the 3% growth in Kimberly-Clark's net sales. Net sales of
$5.3 billion also beat the Zacks Consensus Estimate by 1.9%.
However, currency fluctuations and the exit of non-strategic
products each eroded company's sales by 1% in the quarter.
Furthermore, organic sales growth and cost savings resulted in an
increase in operating profit.
Overall, we are encouraged by the company's leadership
position in several consumer product categories including
diapers, paper goods, health care products, and female personal
care. Moreover, Kimberly-Clark focuses on improving its products
through innovation in order to remain competitive and drive
Kimberly-Clark is also well-positioned overseas and derives
almost half of its revenues from outside U.S. markets. The
company has been investing in key emerging markets through K-C
International ('KCI'), which includes businesses in Asia, Latin
America, the Middle East, Eastern Europe and Africa, with a
particular emphasis on China, Brazil, India and Russia.
Moreover, we are optimistic about the company's restructuring
program as it will improve underlying profitability and return on
invested capital of its consumer tissue and K-C Professional
segments, which have been facing declining profits for many
years. Further, management's initiatives to control costs through
its FORCE program bode well for future operating performance.
Further, the company has plans to divest some lower-margin
businesses in certain markets, mostly in the consumer tissue
segment, in order to improve underlying profitability and focus
its resources on its strongest market positions and growth
Kimberly-Clark holds a Zacks Rank #3 (Hold). Other favorable
stocks in the consumer staples sector include
Green Mountain Coffee Roasters Inc.
Procter & Gamble Co.
). Green Mountain holds a Zacks Rank #1 (Strong Buy), while
Kellogg and Procter & Gamble carries a Zacks Rank #2
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