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KMB

Kimberly-Clark NYSE:KMB Stock Report

Last Price

US$114.58

Market Cap

US$38.7b

7D

-2.2%

1Y

-13.9%

Updated

05 Oct, 2022

Data

Company Financials +
KMB fundamental analysis
Snowflake Score
Valuation4/6
Future Growth2/6
Past Performance2/6
Financial Health3/6
Dividends5/6

KMB Stock Overview

Kimberly-Clark Corporation, together with its subsidiaries, manufactures and markets personal care and consumer tissue products worldwide.

Kimberly-Clark Corporation Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Kimberly-Clark
Historical stock prices
Current Share PriceUS$114.58
52 Week HighUS$145.79
52 Week LowUS$111.90
Beta0.32
1 Month Change-9.41%
3 Month Change-15.56%
1 Year Change-13.88%
3 Year Change-16.58%
5 Year Change-2.77%
Change since IPO512.11%

Recent News & Updates

Oct 03

Kimberly-Clark: No Clean Sheet

Summary Kimberly-Clark has been struggling for years now. 2021 and 2022 results are hurt by inflationary pressures, with margins coming in at multi-year lows. Poor margins and lackluster sales growth do not rhyme with a still demanding valuation, certainly in this interest rate environment. While Kimberly-Clark (KMB) provides cleaning products and tissues to consumers across the globe, it is its investors which can use some comfort after a difficult period of time. Investors have seen a lackluster share price performance recently, driven by a higher interest rate environment. My last take on Kimberly dates back to April 2020, when Kimberly posted a 10% increase in first quarter volumes, with the pandemic contributing to the results in the final month of the quarter. While I was no necessarily interested to see the one time boost to the business, it was a potential longer lasting demand impact which made me a bit upbeat on the business, with people requiring more towels, wipes and hygienic products. A Former Take In April 2020, Kimberly posted a spectacular set of quarterly results. While first quarter sales were up just 8% to $5.0 billion, the spectacular achievement was a 45% increase in net earnings to $1.92 per share, as adjusted earnings came in as high as $2.13 per share. This marked a strong quarterly performance after Kimberly posted 2019 sales at $18.5 billion on which it posted net earnings of $2.2 billion, equal to $6.24 per share, with adjusted earnings reported at $6.89 per share. The company operated with $7.5 billion in net debt, and with EBITDA for 2019 coming in at $4.2 billion, a resulting 1.9 times leverage ratio was very manageable, after 2020 started on a spectacular note. Kimberly traded at $135 per share ahead of the pandemic, translating in to a 19-20 times earnings multiple based on 2019 numbers, a reasonable multiple given the defensive qualities of the business, already low interest rate environment and relative solid balance sheet. The issue is that sustainable sales growth was a bit hard to come by in recent years, as well as the fact that the company has seen an increasing gap between GAAP and adjusted earnings, driven by restructuring and optimization efforts. With shares initially spiking to $150 in March, and trading at $140 in April, I was interested given the anticipation of better days for the business, as well as lower interest rates. My real interest was to see if the growth in sales was entirely due to a hoarding effect, and if and how large and this structural growth component would be. Given this background, I proceeded with caution and did not get involved with the stock. Steady, Then Not So Much Since the pandemic, shares have largely traded in a $120-$150 range in the two years which followed, making me glad that I did not get involved with the stock. Worries about inflation and higher interest rates have even made that shares fell to $112 at the moment of writing, the lowest level since 2019. In January 2021, Kimberly-Clark posted its 2020 results. In the end, full year sales rose just 4% to $19.1 billion in a bit of a deflationary environment, boosting gross margins along the way. Amidst higher marketing expenses, earnings rose 9% to $2.35 billion, with earnings up 10% to $6.87 per share. The company took the opportunity to further refine the business under its 2018 Global Restructuring Program, with adjusted earnings per share up 12% to $7.74 per share. While I am happy to adjust for one-time restructuring expenses, it should be noted that these expenses are quite recurring by now, and take a long time to deliver on tangible results. Amidst comparables becoming more demanding, Kimberly outlined a modest guidance for 2021 which should not be a surprise, as adjusted earnings are seen between $7.75 and $8.00 per share, translating into a GAAP earnings guidance between $7.10 and $7.60 per share. As it turned out, 2021 was indeed a challenging year, with comparables creating a tough set-up. Full year sales rose 2% to $19.4 billion, yet inflation hurt gross margins. Operating profits fell a fifth to $2.5 billion, with net earnings down 23% to $1.81 billion, as GAAP earnings actually fell by nearly a quarter to $5.35 per share. Adjusted earnings fell to $6.18 per share as the cut in the earnings numbers is for real, driven by inflation, supply chain disruptions and deleveraging with volume trends on the retreat. This comes as the structural demand component has vanished since the outbreak of the pandemic. Net debt inched up to $8.3 billion amidst continued buybacks and dividends, as well as regular net capital spending. This makes that in combination with lower profitability, I peg EBITDA at $3.4 billion, for a 2.5 times leverage ratio. Quite frankly, I was puzzled to see shares still trading at $140 at the start of the year after these results were reported, as the performance is utterly soft. While a 3-4% organic growth guidance for 2022 looks comforting, this is largely driven by price growth in all likelihood with earnings only set to rise to $5.60-$6.00 per share, all below the 2019 numbers. First quarter results for this year were a mixed bag. A 7% increase in comparable sales and hike in the full year organic growth guidance to 4-6% look comforting, but this is not. This higher sales guidance is due to inflationary pressures with adjusted earnings down a quarter to $1.35 per share, as the full year earnings outlook was maintained.

Sep 14
Kimberly-Clark (NYSE:KMB) Has A Pretty Healthy Balance Sheet

Kimberly-Clark (NYSE:KMB) Has A Pretty Healthy Balance Sheet

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility...

Sep 13

Kimberly-Clark: On The Verge Of Dividend King Status But I Am Skeptical About Investing

Summary Kimberly-Clark is about to become a Dividend King in 2023 as it's on the verge of delivering its 50th consecutive annual dividend increase. After looking through KMB's financials, I can't justify paying the current multiple Mr. Market has assigned to KMB as its price to FCF is the same as Apple. Kimberly-Clark's dividend yield can be replicated by SCHD while improving the chances of future capital appreciation. I would be looking for an entry point into KMB once it breaks the $100 level, as it would put its price to FCF sub-18. Kimberly-Clark Corporation (KMB) is on the verge of joining the prestigious Dividend King club, which currently has 45 members. Earning a spot on the Dividend Aristocrat is hard enough, but becoming a Dividend King is an accomplishment that few companies will achieve. Dividend Kings have raised their annual dividend for 50 consecutive years while being a member of the S&P 500. KMB has raided its dividend for 49 consecutive years, and more than likely will be crowned a Dividend King in Q1 of 2023 as its 50th dividend increase is paid. If you're an income investor, the idea of owning Dividend Kings is compelling as the likelihood of receiving annual dividend increases becomes a high probability. With KMB about to crossover from Dividend Aristocrat to Dividend King, I wanted to take a deeper look into them. While I believe KMB is a great company, I feel it's a bit overvalued and would rather allocate the capital to a dividend ETF such as the Schwab U.S Dividend Equity ETF (SCHD), which owns 4.42 million shares of KMB. Looking through KMB's financials and providing the reasoning as to why I believe shares are overvalued It would be difficult to argue that KMB is a poorly run company because that isn't the case. KMB is a solid company, generating tens of billions in revenue annually, producing billions in net income and Free Cash Flow [FCF]. You don't get to this level without doing many things well. While I respect what KMB has done operationally and the financial success it has achieved, my opinion is that shares are overvalued at their current level. KMB trades at $126.84 with a market cap of $42.37 billion. KMB pays a dividend of $4.64, which is a forward yield of 3.66%. While I am intrigued by its yield and potential Dividend King status, I don't believe these prices are an optimal entry point. Seeking Alpha When I am looking at income investments, I need to consider what the long-term price history against the S&P has done and if it has underperformed, do I think shares are potentially mispriced? Over the past 5 years, KMB has traded sideways, which I am not punishing them for, but the SPDR S&P 500 Trust (SPY) has appreciated by 63.17%. If I am going to forgo almost 60% in capital appreciation, I need a larger dividend yield than 3.66%. When I invest in REITs, I expect them to trade sideways, but the difference is that when they are yielding between 6-9% my reinvested dividends work at a much quicker pace, and over time my cash flow is significantly increased. I can't get excited about a company with a 3.66% yield that is trading sideways. With that said, I start looking into the financials to determine if I believe the market is mispricing shares, or if KMB is overvalued. The first aspect I look at is growth. Is KMB growing, or have they reached their organic capacity? Over the past decade, KMB has seen its revenue decline YoY 3 times and increase 7 times. Over the past decade, KMB has grown its revenue by $666 million, which is 3.42%. From 2015 – 2019 KMBs revenue fell under $19 billion annually, and recently KMB has strung together several years of YoY revenue increases. In 2021, KMB had its 4th largest fiscal year from a revenue perspective, behind 2014, 2013, and 2012. Currently, in the TTM, KMB's revenue is the largest it's been, exceeding $20 billion, but with the fiscal year not closed, we will have to wait and see if 2022 becomes a record revenue year. Even if revenue stays at this pace, KMB will finish 2022 with $20.13 billion of generated revenue which is 3.42% revenue growth over a decade. Without revenue growth it's hard to get excited about future capital appreciation, especially in an inflationary environment. Seeking Alpha With revenue growth that's almost non-existent, I need to look at KMB's margins. Prior to doing the math, I would assume that KMB would be experiencing declining margins as inflation increases the cost of revenue and operating expenses. Below I created a grid indicating KMB's profit margin annually since fiscal year 2012. Since the close of 2020, KMB's profit margins have declined by -3.42% to 8.87%. KMB is still a profitable company and generates billions in net income, but the combination of declining profit margins and flat revenue isn't a compelling combination for future capital appreciation in its share price. Steven Fiorillo, Seeking Alpha Moving to the cash flow statement, KMB has been stagnant with the cash produced from operations after stripping out 2020 as it looks to be an anomaly. KMB hasn't been able to generate additional cash from operations, and if you leave 2020 in the picture, KMB is generating significantly less cash than it did from a smaller revenue base. The P/FCF metric is a longtime favorite of mine that has recently become popular as FCF has become important again. FCF is often looked at as one of the best measures of profitability as FCF excludes the non-cash expenses of the income statement and includes spending on equipment and assets as well as changes in working capital from the balance sheet. To some investors, FCF is more important to analyze than net income because it's harder to manipulate as it is a true indication of the company's cash. FCF is also the pool of capital that companies can utilize to repay debt, pay dividends, buy back shares, make acquisitions, or reinvest in the business. In the TTM, KMB has produced $1.8 billion of FCF, which places them at a price to FCF multiple of 23.66x. I can't allow myself to pay the same multiple for KMB's FCF as Apple (AAPL). AAPL trades at $157.37, which is a market cap of $2.53 trillion. AAPL has generated $107.58 billion of FCF in the TTM, which places AAPL at a price to FCF multiple of 23.51x. Over the past 4 years, AAPL has grown its FCF by $54.09 billion (101.1%). I like paying between an 18-22x price to FCF multiple for a company, and KMB is slightly out of this range, but it's certainly reasonable compared to many companies in the market today. The problem I have is that I don't believe KMB should be given the same price to FCF multiple as AAPL, especially when AAPL has demonstrated significant growth across the board and KMB has treaded water.

Sep 02

Kimberly-Clark: No Longer Serves As A Safe Haven Stock

Summary Kimberly-Clark is often viewed as a recession-proof safe haven investment because it sells goods that see very little demand destruction under most circumstances. While the assumption about the demand for Kimberly-Clark products being recession-proof is correct, the current recessionary pressures are of a supply-side nature. Kimberly-Clark is not immune to threats to its operations due to supply issues. It needs energy, materials, transport logistics for inputs, and transport of finished goods. Some of its operations may also be exposed to trade and geopolitical frictions. Even though the threat of a recession seems to be rising, I decided to sell about 2/3 of my KMB stock position, in order to diversify to manage risk. Investment thesis: After decades of the world being used to worrying exclusively about demand issues when it comes to economic slowdowns, we are now seeing the emergence of a new era, where supply issues are more likely to dictate the shape of economic cycles. Kimberly-Clark Corp. (KMB) has been thought of as a safe-haven stock that investors saw as a safer option to be invested in when things get bad. A somewhat decent dividend offering made it a great option for riding out rough market turbulence over the decades. The nature of the latest market upheaval makes Kimberly-Clark a less attractive safe haven option, mainly due to the fact that it has significant exposure to global supply chain disruptions, which is one of the main factors that are driving the current stock market. At the same time, it does produce many products that most people are unwilling to give up on in favor of spending on other goods, in other words, we consider them to be necessities of life, before many other goods or services. In this respect, Kimberly-Clark has a relative advantage within the context of consumers increasingly cutting back on discretionary spending in order to cover the costs of necessary goods and services. KMB should increasingly be thought of in these terms as an investment option, rather than as a safe-haven investment in the face of market & economic turbulence. Kimberly-Clark Q2 financial results: KMB sales increased by 7% in the second quarter of the year compared with the same period a year earlier. At the same time, the cost of products sold rose by 9%, meaning that profitability is being squeezed. For the first two quarters combined, the cost of sales increased 11%, even as sales increased by 7%, meaning that there is a significant squeeze equivalent to 4% of revenues. For the six months of 2022, net income declined by 3%, mostly on the back of higher costs of goods sold, coming in at $960 million, on total revenues of $10.2 billion. The net profit margin came in at 9.4%, which is still quite healthy. It is perhaps a reflection of the fact that KMB has enough pricing power to pass on the greater part of the increase in the costs of production. KMB's product lineup amounts to a largely non-discretionary profile. Before I delve into the evolving reshaping of the US and the global economy that makes for a strong case for investors to seek out companies that produce goods that consumers will see as absolutely essential to their basic well-being, I want to just briefly make my argument for why KMB fits the profile. Most often, we think of essential goods and services as food & shelter. This may well be true, but certain goods & services do qualify as near-essential. For instance, disposable diapers, both for infants and adults probably fit in this category for the overwhelming majority of people in the developed world. For instance, between giving up on disposable diapers in favor of reusable, or giving up on buying that new couch, most consumers would prefer the latter if faced with the choice. Even when it comes to other essentials such as food, I am sure that many people would prefer to plant a garden, and perhaps raise some poultry around the house rather than having to deal with the daily inconvenience of washing reusable diaper cloths. Bottom line is that KMB products do have staying power on people's list of essentials, which is why it is generally thought of as a safe haven stock, one wants to own when hard times hit. Even so, we have to reconsider the viability of the argument that it is a safe haven stock, given new dynamics that we see emerging. Supply chain disruptions, the steady rise in input costs, and other factors that define the current onset of rough times ahead mean that KMB can no longer be considered a defensive stock because it can be hit by supply chain disruptions, spiraling production costs, as well as geopolitical disruptions in supplies or sales, same as any other major multinational company. These risks have to be priced in, but perhaps the risks are more than offset by the fact that its sales are not likely to be heavily impacted on the consumer demand side. This makes for a different investment dynamic within the context of a stagflationary global economic environment for the foreseeable future. The odds of a stagflationary economic environment persisting keep rising. In order to understand the arguably new role of KMB's products on the market, we have to gain a better understanding of the fundamental changes taking place within the market itself. Much of the Western World is being confronted with a massive surge in inflation, after more than a decade of worries about stagflationary pressures. At the root of the stagflationary trend is a sustained decline in the World's ability to produce as much of everything that the consumer market demands. We should keep in mind that higher prices also come with rising interest rates, which are set to converge on the consumer, delivering a multi-directional squeeze. In other words, the price of everything is going up, for many people at a faster rate than the rise in their incomes, while the cost of borrowing in order to buy certain items is also going up. For instance, the average loan rate on credit cards is at the highest level since just before the COVID pandemic, and in my view, we will see the highest rates of the current century so far, within months. St. Louis Fed Nominal average hourly wage growth year over year is lagging significantly behind official inflation rate growth. Economic Policy Institute U.S. Bureau of Labor Statistics The difference is not dramatic by any means, but behind those averages which are already bleak, we certainly have many people and households that are falling behind, even as others may be getting ahead. Individuals and households that are falling behind are certain to cut spending, as their incomes can no longer keep up while borrowing on credit cards and other lines of credit is starting to be more and more expensive. Those who are getting ahead, in other words, their incomes are more than keeping up with inflation are not all likely to spend all of their net earnings gains on consumer goods. The net result is therefore an outcome that can only lead to consumer demand growth that is going to be stagnant at best, while in a worst-case scenario, it can start to crater. US inflation numbers as of late are suggesting that we may have turned the corner, and inflation is now set to start declining. I disagree with this view. I think it has been only a temporary reprieve, as I shall explain in greater detail in an upcoming article. Oil prices pulled back significantly from recent highs earlier this year, which helps to moderate inflation throughout the economy. It would be a mistake to assume that this trend will continue. The global oil supply outlook looks grim for the foreseeable future. Natural gas, as well as many other crucial resources, are also seeing a shortfall in the supply/demand balance, globally as well as regionally. Additionally, we still have growing trade and other economic frictions with China, which are also contributing to a deterioration of the global supply chain. All of this continues to be inflationary, and none of it is likely to change in the foreseeable future, even though some people are betting on slowing economic growth and bringing the commodities market back into balance. Furthermore, inflation is still rising in the eurozone, meaning that consumers in Europe are set to cut back on non-essential spending dramatically, as their wages don't come close to keeping up, and many households will be disproportionally hit by high energy prices.

Shareholder Returns

KMBUS Household ProductsUS Market
7D-2.2%-1.3%4.4%
1Y-13.9%-8.3%-18.2%

Return vs Industry: KMB underperformed the US Household Products industry which returned -8.3% over the past year.

Return vs Market: KMB exceeded the US Market which returned -18.2% over the past year.

Price Volatility

Is KMB's price volatile compared to industry and market?
KMB volatility
KMB Average Weekly Movement2.5%
Household Products Industry Average Movement4.1%
Market Average Movement6.9%
10% most volatile stocks in US Market15.5%
10% least volatile stocks in US Market2.8%

Stable Share Price: KMB is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 2% a week.

Volatility Over Time: KMB's weekly volatility (2%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
187245,000Mike Hsuhttps://www.kimberly-clark.com

Kimberly-Clark Corporation, together with its subsidiaries, manufactures and markets personal care and consumer tissue products worldwide. It operates through three segments: Personal Care, Consumer Tissue, and K-C Professional. The Personal Care segment offers disposable diapers, swimpants, training and youth pants, baby wipes, feminine and incontinence care products, and other related products under the Huggies, Pull-Ups, Little Swimmers, GoodNites, DryNites, Sweety, Kotex, U by Kotex, Intimus, Depend, Plenitud, Softex, Poise, and other brand names.

Kimberly-Clark Corporation Fundamentals Summary

How do Kimberly-Clark's earnings and revenue compare to its market cap?
KMB fundamental statistics
Market CapUS$38.68b
Earnings (TTM)US$1.79b
Revenue (TTM)US$20.13b

21.7x

P/E Ratio

1.9x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
KMB income statement (TTM)
RevenueUS$20.13b
Cost of RevenueUS$14.06b
Gross ProfitUS$6.07b
Other ExpensesUS$4.29b
EarningsUS$1.79b

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

Oct 25, 2022

Earnings per share (EPS)5.29
Gross Margin30.16%
Net Profit Margin8.87%
Debt/Equity Ratio1,211.5%

How did KMB perform over the long term?

See historical performance and comparison

Dividends

4.0%

Current Dividend Yield

87%

Payout Ratio