Can Kimberly-Clark's Pricing Actions Offset Rising Input Cost Risks?
Kimberly-Clark Corporation KMB is taking targeted pricing actions alongside a broader set of measures to manage rising input costs. Looking ahead, management estimates gross input cost headwinds of approximately $150 million for the second half of the year. These input-cost pressures are now fully incorporated into the company’s outlook. This follows approximately $50 million of inflationary headwinds in the second quarter, primarily related to higher oil-linked input costs and some impacts from the L.A. distribution center.
The company plans to take pricing actions to help cover inflation in the second half of the year. Management said that the magnitude of these pricing actions is expected to be in the low single digits, primarily in North America, while pricing actions globally will vary by geography. The planned pricing adjustments are intended to help cover inflationary pressures in the second half, with the company emphasizing targeted actions and maintaining consumer value. The pricing actions form part of the company’s response to inflation and higher input costs.
Kimberly-Clark’s pricing actions are already in the marketplace and form part of its effort to maintain PNOC discipline over time. The company continues to follow a principle of keeping pricing net of cost neutral over time. At the same time, it is relying on a broad set of measures rather than revenue growth management alone. Alongside pricing actions, the company is delivering its highest level of productivity to date and actively managing negotiations and contracts with vendors and suppliers. Management is using these multiple levers to address cost pressures rather than relying solely on revenue growth management.
Overall, Kimberly-Clark’s broader cost-management approach is intended to mitigate the impact of higher input costs and inflation. The company also emphasized maintaining a strong value proposition for consumers while taking pricing and productivity actions to manage inflation.
The Zacks Rundown for KMB
KMB stock has lost 4.4% in the past three months compared with the industry’s decline of 0.7%.
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From a valuation standpoint, KMB trades at a forward price-to-earnings ratio of 13.18, lower than the industry’s average of 18.35. KMB currently carries Zacks Rank #3 (Hold).
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The Zacks Consensus Estimate for KMB’s current fiscal-year earnings implies a year-over-year decline of nearly 2%, and the same for next fiscal year earnings implies growth of 2.2%.
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This article originally published on Zacks Investment Research (zacks.com).
