Profit Drops at Kimberly-Clark

The company's fourth-quarter sales rise 2.8%.
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Kimberly-Clark

(KMB) - Get Report

matched Wall Street's earnings estimates for the fourth quarter, but the company provided a mixed forecast, saying that higher costs could put pressure on margins in the early part of 2006.

The maker of Kleenex and Scott tissues posted quarterly sales of $4 billion, up 2.8% from $3.9 billion a year ago. Earnings fell to $371.1 million, or 79 cents a share, from $445.3 million, or 91 cents a share, in the same quarter last year.

However, before items, Kimberly-Clark earned 95 cents in the quarter, in line with the consensus estimate of analysts surveyed by Thomson First Call.

For 2006, the company is projecting revenue growth of 3% to 5%, in line with its long-term objective. Kimberly-Clark is also calling for operating profit growth of 3% to 6% despite projected cost inflation of around $200 million and stock option expenses of $45 million to $50 million.

Additionally, this year the company expects to buy back around $750 million of stock, spend $900 million to $1 billion on its capital plans and boost its dividend "in the high-single, low-double-digit percentage range" if the board approves such a move.

Overall, earnings before unusual items in 2006 should be $3.85 to $3.95. The consensus estimate is $3.95.

"As for the first quarter, we believe earnings per share before unusual items will be in a range of 90 to 93 cents per share, similar to or slightly better than in 2005, taking stock option expense into account," Kimberly-Clark said Tuesday. "We expect to deliver solid top-line growth. At the same time, however, cost inflation will moderate margin improvement in the early part of the year before announced price increases become fully effective and cost reductions begin to ramp up."

On average, analysts are looking for a profit of 95 cents in the first quarter.