Shares of Kimberly-Clark Corp. (KMB) reached a 52-week high of $112.77 on Apr 10, 2014 on expectations of strong first quarter 2014 results, which are scheduled to release on Apr 21. The closing price of this consumer products giant on Thursday was $111.07, translating to a year-to-date return of 7.8%.
Growth Drivers
Kimberly-Clark’s cost saving initiatives, lower commodity costs, and continued product innovation drove earnings in all four quarters of 2013 and made up for increased input costs and currency headwinds. In fact, the company posted better-than-expected earnings in all the quarters of 2013. The company achieved higher organic sales on the back of volume growth and better pricing. We expect these positives to drive earnings in the first quarter of 2014 as well.
Investors are encouraged by the company’s initiatives to control costs through its FORCE program and a restructuring initiative, which are likely to improve underlying profitability and return on invested capital at its consumer tissue and K-C Professional segments. Profits of these two segments have been declining for many years.
Kimberly Clark’s restructuring and cost savings initiatives helped reduce costs and led to higher operating profit in both 2012 and 2013.
During its fourth-quarter conference call, Kimberly-Clark expressed its optimism for 2014. On a year-over-year basis, management expects adjusted earnings to increase 4% – 7% from 2013. Net sales are expected to increase in a range of (1%) to 2% for 2014, with organic sales growth of 3% to 5%. The company also expects adjusted operating profit to increase 3% to 7% for 2014, with cost savings of at least $300 million from the FORCE program.
Kimberly-Clark carries a Zacks Rank #2 (Buy), while its Earnings ESP is 0.00%.
Other players in the consumer staple companies worth considering include Diamond Foods, Inc. (DMND), Supervalu Inc. (SVU) and McCormick & Co. Inc. (MKC), all of them holding a Zacks Rank #2.
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