KMB – Kimberly-Clark Stock Is Nothing to Sneeze At

by Louis Navellier | October 23, 2013 9:25 am

Welcome to Today’s Stock of the Day!

Kimberly-Clark Corp. (NYSE: KMB)Cold and flu season is just around the corner so many are stocking up on tissues, hand sanitizer and disinfecting wipes. This is great business for personal care giant Kimberly-Clark (KMB[1]). Coincidentally KMB shares are on the rise after the company’s surprisingly strong third-quarter earnings announcement. But can KMB keep up the momentum heading into cold and flu season? Let’s find out:

Company Profile

Kimberly-Clark specializes in disposable personal care products like Kleenex tissues, Huggies diapers, Scott toilet paper and Kotex feminine products. Additionally, under its K-C Professional segment, the company makes soaps, sanitizers and tissues for a range of workplace needs. Kimberly-Clark sells its household products through mass merchandisers and other retail outlets; it holds the No. 1 or No. 2 brand share in more than 80 countries. With 140 years of experience in the business and a global workforce of 58,000 employees, Kimberly-Clark brought in over $21.1 billion in sales last year.


Earnings Rundown

Kimberly-Clark reported strong third-quarter sales and earnings on Tuesday. Compared with Q3 2012, net income advanced 6% to $546 million. Adjusted earnings weighed in at $1.44 per share, which topped the $1.40 consensus estimate by 3%. Over the same period, net sales ticked up from $5.25 billion to $5.26 billion. Analysts forecast sales of $5.23 billion, so Kimberly-Clark also posted a modest sales surprise. Stripping the impact of acquisitions, divestitures and foreign exchange rates, organic sales rose 5% over last year.

While Kimberly-Clark lost some sales by exiting much of its personal care business in Europe, the company benefited from sales increases in Consumer Tissue, K-C Professional and Health Care segments. The company also lifted its 2013 full-year earnings outlook to a range of $5.65 to $5.75 per share. Earlier, the company had forecast earnings in a range of $5.60 to $5.75 per share. As to be expected, shares gapped up following the report, and I see plenty of upside from here.


Dividend Buzz

I like KMB for its sizeable 3.3% dividend yield—one of the highest in the Personal Products industry. The company has a strong dividend history, having hiked up its annual payment for each of the past 40 years. We’ll likely see KMB declare its next quarterly dividend in a few weeks to stay tuned.


Current Ratings

Before you buy any stock, you should always run it through my free Portfolio Grader ratings system[2]. With healthy fundamentals and strong buying pressure backing up this Conservative stock, KMB spent much of the past year at a solid buy.

However, KMB did get caught up in some of the general choppiness hitting high-yield stocks this fall. So my screens detected a decline in buying pressure (resulting in a C-rated Quantitative Grade) and I was prompted to downgrade the stock to a hold. Even so, I don’t expect this short-term weakness to last. As I covered earlier, the company just reported strong quarterly results.

This, compounded with a weak dollar that will boost the company’s results going forward, should should help lift KMB’s ratings for sales growth, operating margin growth, earnings growth and earnings surprises. While KMB is a C-rated stock at the moment, it’s quite likely that it will re-enter buy territory before long.


Bottom Line

As of  October 22, 2013, I consider KMB a C-rated Hold. However, that may change once I plug the latest earnings results into Portfolio Grader. So if you’re interested in KMB, be sure to check my Portfolio Grader ranking next Monday morning.

Recommendation: C-rated Hold


Would you like to check the fundamentals backing up one of your stocks? For more stock grades, please visit my Portfolio Grader website[3]!

  1. KMB:
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