The board of directors of
) has proposed a spin-off of its healthcare business in order to
focus on its consumer and professional brands. The spinoff is
expected to be completed at the end of the third quarter of 2014
and is yet to get regulatory approval.
) will become the advisor for Kimberly-Clark on the deal.
Post spin-off, the healthcare business will become a separate
publicly traded company with about $1.6 billion in annual sales.
It already has a market leading position in both surgical and
infection prevention products and medical devices. Robert
Abernathy - the president of Kimberly-Clark's Europe group - will
become the CEO of the new healthcare company.
Lately, the company's healthcare business has been witnessing
decelerated sales growth, thus raising concerns for this consumer
products giant. This could be due to the fact that more and more
consumers were opting for high deductible, consumer directed
healthcare plans or alternate therapies before surgery, which in
turn impacted the business.
Moreover, Kimberly-Clark increased the prices of disposable
exam gloves after synthetic nitro prices shot up last year. The
pricing action resulted in slowdown in volumes. The company
believes that this decision to spin-off would allow its
healthcare business to optimize its performance and offer
flexibility to pursue its own value-creation opportunities.
Trimming down its operations would also boost the stock price of
In October, Kimberly-Clark, the maker of Kleenex tissues and
Huggies diapers, posted healthy third quarter 2013 results,
beating the Zacks Consensus Estimate on both counts.
Kimberly-Clark also increased the lower end of its previously
provided earnings guidance for 2013, signaling growth
Overall, we remain impressed with the company's restructuring
and cost savings program, which has increased profitability. In
addition, the company's efforts to streamline the European
facilities by dissolving the diaper segment of Western and
Central Europe is expected to optimize resources. Further,
regular innovations, the company's growth initiatives and its
strong international presence make the stock attractive.
Kimberly-Clark holds a Zacks Rank #2 (Buy).
Other stocks in the consumer staples sector that are
WD 40 Co.
Pinnacle Foods Inc.
). Both of them carrying a Zacks Rank #2 (Buy).
KIMBERLY CLARK (KMB): Free Stock Analysis
MORGAN STANLEY (MS): Free Stock Analysis
PINNACLE FOODS (PF): Free Stock Analysis
WD 40 CO (WDFC): Free Stock Analysis Report
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