KMB Posts Mixed 3Q, Ups View - Analyst Blog

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Kimberly-Clark Corporation 's ( KMB ) third quarter 2012 adjusted earnings (excluding charges) of $1.34 per share beat the Zacks Consensus Estimate of $1.32 per share by 1.5 %. Adjusted earnings also surpassed the prior-year quarter's earnings of $1.26 per share by 6.4%.

Bottom-line growth was boosted by organic sales growth, cost savings and a reduced commodity costs.  Adjusted earnings do not include costs for pulp and tissue restructuring actions.

Quarter in Detail

The company reported net sales of $5.2 billion in third quarter 2012, down 3% from the prior year quarter. Organic sales grew 3% from prior year quarter, driven by volume growth, improved pricing and strong performance in K-C International segment. The company's results slightly lagged the Zacks Digest average revenue of $5.4 billion by 2.2 %.

Sales volume contributed 2% to the sales increase, while net selling prices added 1%. However, the results were impacted by unfavorable foreign currency fluctuations, which limited sales growth by 5%. The exit of non-strategic products also eroded sales volumes by an additional 1%.

Excluding costs for the pulp and tissue restructuring, adjusted operating profit grew 8% to $814 million in third quarter 2012, driven by increase in organic sales and cost savings from the Kimberly-Clark's FORCE (Focused On Reducing Costs Everywhere) program.

Personal Care Products: Personal Care segment includes products like disposable diapers, training/ youth/ swim pants; baby wipes; feminine and incontinence care products under brands, such as Huggies, Pull-Ups, Little Swimmers, GoodNites, Kotex, Lightdays, Depend and Poise.

Sales grew 1% on a year-over-year basis to $2.4 billion. The results were benefited from a 4% increase in sales volumes and 2% rise in net selling prices, which offset the negative impact from currency fluctuations by 5%. The segment witnessed positive sales growth in North America and K-C International, partially offset by decline in sales growth in Europe.

Segment's operating profit increased 10% on a year-over-year basis to $436 million in the quarter due to organic sales growth, reduced commodity prices and cost savings, partially offset by rise in marketing, research and general expenditures and unfavorable currency rates.

Consumer Tissue : 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 and Page.

Sales were $1.6 billion in third quarter 2012, down 6% y/y, owing to currency translation. The segment witnessed decline in sales in all geographic regions including North America, Europe and K-C International. However, organic sales volumes grew 2% y/y.

Segment operating profit climbed 5% to $216 million in the quarter driven by benefits from cost savings, organic sales increase and commodity cost deflation, partially offset by higher marketing, research and general expenses and unfavorable currency rates.

K-C Professional (KCP) & Other: 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.

Sales decreased 5% from prior year quarter to $0.8 billion in third quarter 2012, driven by unfavorable currency rates. The segment witnessed decline in sales in all geographic regions including North America, Europe and K-C International.

Segment operating profit for the segment increased 13% to $144 million driven by input cost deflation and cost savings, partially offset by increased marketing, research and general expenses and unfavorable currency rates.

Health Care: The Health Care segment consists of disposable health care products, such as surgical drapes and gowns, sterilization wrap, face masks, exam gloves, digestive health, respiratory products, pain management products and other disposable medical products.

Sales declined 3% from prior year quarter to $0.4 billion in third quarter 2012, resulting from unfavorable currency rates by 2% and sales volume by 1%.

Operating profit was $59 million, up 5% year over year, owing to lower commodity cost.

Fiscal 2012 Outlook

A peer of Procter & Gamble ( PG ), Kimberly-Clark raised its expectation of adjusted earnings ( for fiscal 2012 to the range of $5.15 to $5.25, from the previous guidance of $5.05 to $5.20 per share. The earnings per share is expected to grow 7% to 9% from the prior-year levels. The company raised the guidance as it expects stronger organic sales growth, better cost savings, and reduced input cost in the upcoming quarters.

The company announced plans to dissolve the diaper segment of Western and Central Europe, excepting the Italian market. The company also plans to streamline its manufacturing facilities in Europe.

We currently have a Neutral recommendation on Kimberly-Clark Corporation. The stock carries a Zacks #3 Rank (a short-term Hold rating).



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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: KMB , PG

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