Company Reports

Like its peers, narrow-moat Kimberly-Clark has faced numerous challenges, including a tepid economic environment and elevated cost pressures from inflation and tariffs. We question whether Kenvue's struggling consumer health brands are the right antidote. This counters Kimberly's focus over the past few years on its core personal care brands across baby, feminine, and adult care. And it will take meaningful resources to drive accelerating sales and profits at Kenvue, in our view.

Kimberly-Clark's organic sales were flat in the second quarter, with lower prices negating the benefit from favorable mix. Adjusted operating margin expanded 100 basis points to 18.1%, as cost savings (pegged at 6% of cost of goods sold) funded brand and supply chain investments.

Like its peers, narrow-moat Kimberly-Clark has faced numerous challenges, including a tepid economic environment and elevated cost pressures from inflation and tariffs. We question whether Kenvue's struggling consumer health brands are the right antidote. This counters Kimberly's recent focus on its core personal care brands across baby, feminine, and adult care. And it will take significant resources to drive accelerating sales and profits at Kenvue, in our view.

In the first quarter, Kimberly-Clark chalked up 2.5% organic sales growth, netting a 3% benefit from higher volumes and favorable mix against a 0.5% pullback in pricing. The adjusted gross margin contracted 60 basis points to 37.9%, as brand and supply chain investments ate into cost savings.

Like its peers, narrow-moat Kimberly-Clark has faced numerous challenges, including a tepid economic environment and elevated cost pressures from inflation and tariffs. We question whether Kenvue's struggling consumer health brands are the right fit. This counters Kimberly's recent focus on its core personal care brands across baby, feminine, and adult care. And it will take significant resources to drive accelerating sales and profits at Kenvue, in our view.

In the final three months of the year, Kimberly-Clark posted 2% organic sales growth (including a 3% benefit from volume and mix, partially offset by 1% lower prices) against a 37% adjusted gross margin, flat with the year-ago quarter.

Kimberly-Clark will acquire Kenvue for $48.7 billion, with Kenvue shareholders receiving $3.50 per share in cash and 0.14625 Kimberly shares upon the transaction's close in second-half 2026. The deal values Kenvue at 14 times adjusted EBITDA. Kimberly shares sank around 12% on the news Nov. 3.

Like its peers, narrow-moat Kimberly-Clark has been faced with numerous challenges, including a tepid economic environment and elevated cost pressures stemming from inflation and tariffs. But we don't think adding Kenvue's languishing consumer health brands is the right elixir. This counters Kimberly's recent bent to focus its resources on its core personal care brands across baby, feminine, and adult care. And it will take significant resources to drive accelerating sales and profits at Kenvue, in our view.

Kimberly-Clark chalked up 2.5% volume-led organic sales growth in its third quarter. However, productivity gains were unable to offset unrelenting inflationary headwinds, with the adjusted gross margin contracting 170 basis points to 36.8%.

Organic sales rose 3.9% in Kimberly-Clark's second quarter, a byproduct of higher volumes (up 5%) that were only partially offset by lower prices (down 1.2%). Volumes were inflated to the tune of 170 basis points, though, on retailer inventory stocking. Adjusted operating margin was flat at 17.3%.

Kimberly-Clark is spinning its international family and professional arm into a partnership with Suzano, a Brazilian pulp supplier and producer of paper and packaging. Kimberly will receive about $1.7 billion (representing 1 times sales) and will own 49% of the venture at close, slated for mid-2026.

Like peers, narrow-moat Kimberly-Clark has been inundated by many challenges, including a tepid economic environment and elevated cost pressures, including impending tariffs. In this context, management has been forthright that its market share had lagged, and consumers have traded down to lower-priced options in select categories to preserve cash. We think this could prompt a step-up in promotions across its categories—now that industrywide supply/demand imbalances have largely been put to rest.

Kimberly-Clark's first-quarter organic sales slumped 1.6%, a byproduct of lower prices, but margins held up. The adjusted gross margin contracted just 20 basis points to 36.9%, while the adjusted operating margin was flat year over year at 17.4%.

Like peers, narrow-moat Kimberly-Clark has been inundated by many challenges, including a tepid economic environment and elevated cost pressures. In this context, management has been forthright that its market share has lagged and consumers have been trading down to lower-priced options in select categories to preserve cash. We think this could prompt a step-up in promotions across its categories—now that industrywide supply/demand imbalances have largely been put to rest.

Kimberly-Clark chalked up 2.3% organic sales growth, driven by a 1.5% benefit from increased volumes, a 0.5% boost from higher prices, and a 0.1% contribution from favorable mix. In addition, efficiency initiatives buoyed the adjusted gross margin to 35.4%, 50 basis points above the prior year.

Like peers, narrow-moat Kimberly-Clark has been inundated by a slew of challenges, including a tepid economic environment and elevated cost pressures. In this context, management has been forthright that its market share has lagged, and consumers are increasingly trading down to lower-priced options in select categories to preserve cash. We think this could prompt a step-up in promotions across its categories—now that industrywide supply/demand imbalances have largely been put to rest.

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.

Like peers, narrow-moat Kimberly-Clark has been inundated by a slew of challenges, including a tepid economic environment and elevated cost pressures. In this context, management has been forthright that its market share has lagged, and consumers are increasingly trading down to lower-priced options in select categories to preserve cash. We think this could prompt a step-up in promotions across its categories—now that industrywide supply/demand imbalances have largely been put to rest.

Against a backdrop of retail inventory destocking aimed at reaching normalized, prepandemic levels, narrow-moat Kimberly-Clark posted a decent 2% increase in volume mix, though on a 1.5% pullback in pricing (after adjusting for hyperinflationary price hikes in Argentina). Concurrently, Kimberly's productivity initiatives—including the completion of its integrated global supply chain—unlocked $250 million in savings in the first half as part of its broader initiative to achieve $3 billion in efficiencies. This helped boost adjusted gross margin by 290 basis points to 36.9% in the quarter. As such, management raised its adjusted earnings per share growth outlook to a mid to high-teens rate from low teens, leading us to adjust our low-teens forecast to align with the revised range. However, we don't intend to materially alter our $144 per share fair value estimate and suggest investors keep an eye on shares, following a mid-single-digit percentage decline on the news.

Like peers, narrow-moat Kimberly-Clark has been inundated by a slew of challenges, including a tepid economic environment and elevated cost pressures. In this context, management has been forthright that its market share has lagged, and consumers are increasingly trading down to lower-priced options in select categories to preserve cash. We think this could prompt a step-up in promotions across its categories—now that industrywide supply/demand imbalances have largely been put to rest.