Kimberly-Clark's stock jumps 5.7% as company sweeps past earnings estimates

By Ciara Linnane

Consumer goods company is refocusing on the 12 brands that account for 80% of sales

Kimberly-Clark Corp.'s stock rose 5.7% early Tuesday, after the parent to consumer brands including Huggies diapers and Scott and Kleenex tissues beat profit and sales estimates for the first quarter.

The stock (KMB) was on track for its biggest one-day gain since April 22, 2022, when it rose 8%. It's up for four of the past five days and has gained 8.8% in the period.

"We continued our strong productivity momentum through our efforts to optimize our margin structure, and we are making good progress focusing our enterprise as we advance the implementation of our new operating model," CEO Mike Hsu said in a statement.

The company announced plans to reorganize its business segments and overhaul its supply chain at an investor day in March. The program is expected to cost about $1.5 billion in restructuring charges over the next three years.

The new structure divides the business into three segments of North America, International Personal Care and International Family Care and Professional. Kimberly-Clark is expecting the changes to generate about $200 million in savings over the next few years.

The company will also refocus its efforts on growing its top 12 brands that account for more than 80% of its sales in core segments with the aim of becoming more agile and boosting profitability.

The move came after a weaker-than-expected fourth-quarter earnings report from January, when sales missed for a second straight quarter.

On Tuesday, Kimberly-Clark posted net income of $647 million, or $1.91 a share, up from $566 million, or $1.67 a share, in the year-earlier period. Adjusted for one-time items, the company's per-share earnings came to $2.01, ahead of the $1.63 FactSet consensus.

Sales fell 1% to $5.149 billion, but were ahead of the $5.084 billion FactSet consensus.

Sales were hit by a roughly 5% impact from the strong dollar, said Hsu.

Organic sales, which exclude forex effects and the impact of acquisitions, rose 6%, driven by a 4% increase in price, 1% favorable product mix and a 1% increase in volume.

"Price-led gains reflected necessary pricing actions to address higher local costs in hyperinflationary economies, mainly in Argentina," said the statement.

By segment, personal care sales rose 2%, consumer tissue sales fell 2%, and K-C professional sales fell 3%.

The company tweaked its guidance for 2024 and now expects organic sales to be up by mid-single digits, compared with prior guidance of low-to-mid-single digits.

It expects net sales to be impacted by 400 basis points of currency translation, compared with prior guidance of 200 basis points. It expects a 120 basis-point impact from divestitures, versus prior guidance of 60 basis points.

Adjusted EPS is expected to grow at a low teens percentage rate on a constant-currency basis, compared with prior guidance for high-single-digit growth.

Reported EPS is expected to be negatively impacted by about 700 basis points by currency, compared with prior guidance for a 400 basis-point headwind.

The strong dollar has re-emerged as a headwind for consumer companies in recent quarters, as it hurts companies that compete all over the world by reducing the amount they receive when they repatriate cash from weaker-currency countries.

Read also: Kimberly-Clark's stock hit by BofA downgrade, while Clorox gets an upgrade

The stock has gained 12.6% in the year to date, while the S&P 500 SPX has gained 6%.

-Ciara Linnane

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04-23-24 1105ET

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