On Tuesday, CFRA made an adjustment to Kimberly Clark 's (NYSE:KMB) financial outlook, raising the price target to $151 from the previous $138 while keeping a Hold rating on the stock. The new target reflects a valuation of 19.75 times the firm's projected 2025 earnings per share (EPS) of $7.66, an increase of $0.32 from earlier estimates. The 2024 EPS forecast was also raised by $0.13 to $7.41, aligning with the five-year forward price-to-earnings (P/E) mean.
The analyst highlighted that Kimberly Clark's third-quarter adjusted EPS of $1.83, which marked a 4.9% year-over-year increase, surpassed expectations by $0.12. However, revenue fell 3.5% year-over-year to $4.9 billion, roughly 2% below the consensus. Organic growth slowed to 1%, primarily driven by pricing and product mix changes. Volume declines were attributed to weaker demand in North American professional channels and a drop in private label shipments, exacerbated by retailer destocking and shipping delays.
Despite these challenges, Kimberly Clark reported an increase in market share compared to the previous year. The company's strategic initiatives have led to an adjusted gross margin expansion of 80 basis points to 36.7%, which supported a 60 basis points increase in advertising spending. The adjusted EBIT margin improved significantly, showing a year-over-year increase of 130 basis points to 16.3%.
Facing headwinds in volume, Kimberly Clark has revised its organic growth guidance to 3.5% from a previous mid-single-digit projection. Nevertheless, the company has maintained its expectation for mid-teens EPS growth in constant currency terms. CFRA believes that Kimberly Clark's ongoing reorganization, which focuses on stimulating growth and optimizing margins, may help to mitigate some of the impacts from the current consumer softness.
In other recent news, Kimberly-Clark Corporation (NYSE:KMB) reported its third-quarter results for 2024, with earnings surpassing estimates but revenue falling short of expectations.
The company posted adjusted earnings per share of $1.83, exceeding the analyst consensus of $1.70, yet its revenue of $5 billion was below the projected $5.06 billion. Net sales saw a 4% decrease from the previous year, influenced by negative foreign currency translation and the divestiture of the K-C Professional Personal Protective Equipment business.
Kimberly-Clark also adjusted its full-year organic sales growth outlook, now anticipating growth of 3-4%, a decrease from its previous mid-single digit growth forecast. This revision is due to identified headwinds from changes in retail inventory levels. Despite these changes, the company maintained its guidance for adjusted operating profit and adjusted earnings per share to grow at a mid-to-high teens percentage rate on a constant-currency basis.
CEO Mike Hsu highlighted the company's strong execution across the business, attributing organic top-and-bottom-line growth to market share gains and improved productivity. The company also noted an expansion in its adjusted gross margin by 90 basis points YoY to 36.7%, due to strong gross productivity gains.
InvestingPro Insights
To complement CFRA's analysis, InvestingPro data provides additional context for Kimberly Clark's financial position. The company's P/E ratio stands at 20.43, with an adjusted P/E of 18.67 for the last twelve months as of Q2 2024. This aligns closely with CFRA's valuation model, which uses a multiple of 19.75 times projected 2025 earnings.
Kimberly Clark's revenue for the last twelve months as of Q2 2024 was $20.28 billion, with a slight decline of 0.32% over this period. This data supports the article's mention of recent revenue challenges, including the 3.5% year-over-year drop in the third quarter.
An InvestingPro Tip highlights that Kimberly Clark "has raised its dividend for 51 consecutive years," underscoring the company's commitment to shareholder returns despite market fluctuations. This consistent dividend growth may provide some reassurance to investors in light of the current volume headwinds and revised organic growth guidance mentioned in the article.
Another relevant InvestingPro Tip notes that the stock "generally trades with low price volatility," which could be attractive to investors seeking stability in uncertain market conditions. This characteristic may help explain why CFRA maintains a Hold rating despite the challenges outlined in the article.
For readers interested in a deeper dive into Kimberly Clark's financials and market position, InvestingPro offers 10 additional tips, providing a comprehensive view of the company's strengths and potential risks.
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