Kimberly-Clark Tumbles on Poor Earnings

Kimberly-Clark stock has been tumbling by 5.8% to $62.63 after the company lowers its full-year guidance amid soft market demand, high raw material costs and aggressive competition.
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Kimberly-Clark

(KMB) - Get Report

was tumbling by 5.8% to $62.63 after the company lowered its full-year guidance amid soft market demand, high raw material costs and aggressive competition.

For the full-year, Kimberly-Clark lowered its net sales growth forecast to 3% versus previous guidance of 3% to 5% growth. Full-year adjusted earnings per share projections were lowered to a range of $4.60 to $4.70 from the previously-expected range of $4.80 to $5. In July, Kimberly-Clark said it expected EPS to fall at the lower end of the $4.80 to $5 range.

Analysts on average have been expecting earnings of $4.83 a share.

For the third quarter, Kimberly-Clark reported net income decline of 19.4% to $469 million, or $1.14 per share, from $582 million, or $1.40 per share the previous year. Analysts on average had been expecting earnings of $1.28 a share. The decline occurred amid organic sales increase of 1%, helped by a 5% gain in the company's personal care business. However, the company saw volume decline in Kimberly-Clark's K-C Professional business amid challenging economic conditions, as well as volume declines at its Venezuela operations.

Key inputs costs amounted to about $265 million, including $170 million in higher fiber costs and $90 million for raw materials other than fiber.

Net sales in the quarter increased 1.3% to about $4.98 billion from $4.91 billion the previous year. Analysts on average had been predicting sales of $5 billion.

After Kimberly-Clark's earnings release, BMO analyst Connie Maneaty maintained her market perform rating for the stock and said her estimates were under review. "Weakness in end-market demand and competitive activity that is slightly more aggressive than expected temper our outlook for sales growth," she said in a research report. "Higher-than-expected input costs and the need to rein in production to limit inventory growth add more pressure to the earnings outlook."

Meanwhile, J.P. Morgan analyst John Faucher, who holds a neutral view of the stock, said in a client note that a positive aspect of the earnings report was that consumer tissue sales came in better than he expected, growing 1% compared with his negative 2% to3% estimate. For Faucher, the key negative takeaways included organic top line results coming in below his expectations, contraction of gross margin to 32.4% compared with his 34.5% estimate and each division of the company missing his operating profit target, with professional and health care showing the biggest misses.

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-- Written by Andrea Tse in New York.

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