Kimberly-Clark KMB trades 21% off its highs going into its Q3 earnings release on October 25. The consumer packaged goods giant behind Kleenex, Cottonelle, and many other paper products is facing the same headwinds much of the market is experiencing. Wall Street will be hoping it can provide upbeat guidance.
Kimberly-Clark’s personal care segment features products like Huggies diapers, baby wipes, feminine care, and incontinence products. The consumer tissue segment includes products such as facial and bathroom tissue, paper towels, and napkins. And lastly, the K-C professional segment consists of many of its iconic brands such as Kleenex at a business scale, as well as apparel, soaps, sanitizers, and towels.
KMB is down -19% year to date, slightly outperforming the S&P 500. This has also been on par with its peer group’s -18%. The stock has struggled prior to the current market conditions. Over the last three years, KMB is still down -7% to underperform the benchmarks +28% and its peer group’s virtually flat performance.
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Longer-term investors hope KimberlyClark can eventually rebound and regain its strong performance over the last decade. If we look at the total return including dividends over the last 10 years, we can see KMB is up a solid +90%. While this underperformed the benchmark, KMB’s decade-long climb is respectable and crushed its peer group’s -36% decline which includes competitors such as International Flavors & Fragrances IFF and Newel Brands NWL.
The Zacks Consensus Estimate for KMB’s Q3 earnings is $1.48 per share, which would represent a 8% decrease from Q3 2021. Sales for Q3 are expected to remain flat at $5.02 billion. Estimates for the period have trended down from $1.65 per share at the beginning of the quarter.
Year over year, KMB earnings are expected to decline 9% in 2022, but its FY23 earnings are set to rise 15% at $6.43 per share. Top line growth is expected in FY22, with sales projected to be up 3% but decline 1% in FY23 to $19.88 billion. This is an indication that KimberlyClark will better manage rising inflation and operation cost in FY23 with earnings set to rise despite the decline in top line sales.
Currently trading around $114 a share, KMB has a P/E of 20.2X. This is above the industry average of 12.3X. This is slightly below its own decade high of 24.2X and closer to the median of 18.9X.
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KMB is starting to trade attractively relative to its past, but positive guidance and perhaps raising its full-year 2022 and FY23 earnings outlook will be key to investors getting back in on the stock.
KimberlyClark currently lands a Zacks Rank #3 (Hold) and its Consumer Products-Staples Industry is in the bottom 45% of over 250 Zacks Industries. However, KMB’s valuation is becoming reasonable and offers investors a generous 4.06% annual dividend yield at $4.64 a share.
KMB stock could get back on track with an earnings beat and positive guidance. The average Zacks Price Target also suggests 16% upside from current levels.
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