NEW YORK (TheStreet) -- Analysts at Deutsche Bank upgraded their rating on Kimberly Clark (KMB - Get Report) to "buy" from "hold," on Tuesday morning. The firm maintained its $118 price target on the stock.
The rating upgrade was based on a pullback in the stock, benign commodities, healthy market shares, sold dividend yield and reasonably supportive category growth, Deutsche Bank said.
"With shareholder friendly capital allocation and reasonable valuation, downside is limited, with multiple expansion and earnings growth driving upside, unless rate increases are significant," the firm said in an analyst note.
Kimberly Clark is an Irving, Texas-based manufacturer and marketer of products made from natural or synthetic fibers. The company operates in three segments: Personal Care, Consumer Tissue and K-C Professional.
Some of the company's brands include Huggies diapers, Kleenex, Kotex and Depend.
Shares of Kimberly Clark are higher by 1.26% to $105.08 in pre-market trading today.
Separately, TheStreet Ratings team rates KIMBERLY-CLARK CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate KIMBERLY-CLARK CORP (KMB) a HOLD. The primary factors that have impacted our rating are mixed – some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its expanding profit margins, notable return on equity and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 39.91% is the gross profit margin for KIMBERLY-CLARK CORP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -6.56% trails the industry average.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to other companies in the Household Products industry and the overall market on the basis of return on equity, KIMBERLY-CLARK CORP has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.1%. Since the same quarter one year prior, revenues slightly dropped by 6.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Household Products industry. The net income has significantly decreased by 159.9% when compared to the same quarter one year ago, falling from $509.00 million to -$305.00 million.
- The debt-to-equity ratio is very high at 14.73 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.43, which clearly demonstrates the inability to cover short-term cash needs.
- You can view the full analysis from the report here: KMB Ratings Report