Kimberly-Clark Earnings: Volume Growth Eases, but Commitment to Brand Investment Stays Strong

Narrow-moat Kimberly-Clark reported a soft fiscal 2024 third quarter, with volume/mix stagnant amid a 1.5% decline in pricing (adjusted for hyperinflationary increases in Argentina). Volume was pressured by ongoing retail inventory destocking to prepandemic levels, disruptions from Hurricane Helene, strategic reductions to its private-label business, and weaker demand in the North American professional segment, collectively a 2% drain in the quarter. Cash-strapped consumers in the Asian and Latin American markets added to these challenges. Despite these headwinds, the firm delivered solid supply chain productivity gains, achieving $135 million in savings and boosting adjusted gross margin by 90 basis points to 36.7% in the quarter. As a result, the firm kept its fiscal 2024 adjusted earnings per share growth outlook at a mid- to high-teens rate, while lowering its full-year organic sales growth forecast to 3%-4% from a mid-single-digit percentage rise previously. Taking into account macroeconomic and competitive headwinds, we plan to tick down our sales forecast and expect to trim our $145 per share fair value estimate by a low-single-digit percentage, rendering shares fairly valued after a mid-single-digit pullback following the results.