Kimberly-Clark Profit Tops Estimates on Higher Pricing
Kimberly-Clark Corp. (KMB), the maker of Huggies diapers and Kleenex tissues, reported first-quarter profit that topped analysts’ estimates, helped by price increases and international sales growth.
Net income rose 34 percent to $468 million, or $1.18 a share, from $350 million, or 86 cents, a year earlier, the Dallas-based company said today in a statement. Excluding some items, profit was $1.24, compared with the $1.17 average of 13 analysts’ estimates compiled by Bloomberg.
Kimberly-Clark, along with other consumer-products companies, raised prices in the past year to mitigate higher expenses for some commodities that are now moderating. Organic sales growth rose 13 percent in the international division, compared with 6 percent companywide.
“Clearly, the overseas part of this is helping,” Jack Russo, an analyst at Edward Jones & Co., said today in an interview. “They’re off to a good start, and this hopefully bodes well for the other personal care-household products companies,” said Russo, who recommends holding the shares.
The shares rose 1.6 percent to $76.47 at the close in New York. Kimberly-Clark has gained 4 percent this year.
Revenue advanced 4.2 percent to $5.24 billion, according to the statement. The company is still coping with continued low birthrates in the developed world, and in January predicted full-year profit that trailed analysts’ estimates, citing slowing demand in developed markets and foreign currency “headwinds” this year.
Kimberly-Clark reaffirmed its full-year earnings forecast of $5 to $5.15 a share, excluding restructuring costs.
Connie Maneaty, an analyst at BMO Capital Markets in New York, said in a note today that the forecast is “conservative, especially given the solid organic sales results” in the first quarter. She has a “market perform” rating on the shares.
Kimberly-Clark plans to boost marketing faster than sales, particularly overseas, Chief Executive Officer Tom Falk said in the statement. Last year, about half of the company’s sales came from outside the U.S.
Television advertising is still important in developing markets and social media is particularly effective in reaching overseas consumers buying diapers and feminine care, Chief Financial Officer Mark Buthman said today in a telephone interview.
Executives on a conference call discussed extending more of the company’s brands overseas. Kimberly-Clark sees opportunities to expanding categories in developing markets, such as incontinence products, Buthman said.
The quarter included $60 million in cost reductions. While the cost of fiber fell, total prices for materials rose $10 million from a year earlier. For this year, Kimberly-Clark said it expects its commodity costs to range from a $50 million decrease to a $50 million increase.
Kimberly-Clark is more affected by commodity costs than other consumer products companies because of the range of products it sells, said Russo.
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