Affordable Income Offered By Kimberly-Clark

By Ryan C. Fuhrmann | October 28, 2011 AAA

Consumer goods giant, Kimberly-Clark (NYSE:KMB), reported solid sales growth and earnings that met analyst projections on Oct. 24, 2011. Results continue to be adversely impacted by rising raw material costs, but are still as consistent as investors are likely to find, in the market today. Throw in an above-average dividend yield and the stock may appeal to conservative, income-minded investors.
Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Third Quarter Recap

Sales advanced 8% to $5.4 billion, which the company noted represented "an all-time record" in terms of quarterly revenue. International led the way with a 12% top-line improvement, while total company organic growth was pegged at 4%. The K-C Professional segment, composing 16.1% of total sales, which sells company products to businesses and other non-consumer customers, and health care (7.6%), which sells pain management products and disposable medical products, both logged growth greater than 10%.

The personal care (44.5%) category that sells the company's flagship Huggies, Depends and other well-known brands, was the next best performer at 9.5% growth. Consumer tissue sells an equally-ubiquitous line of brands including Kleenex, Scott and Cottonelle (31.8%), reported more modest growth of 4.1%.

Personal care was the only segment to report a profit decline, but given it is the largest segment, proved sufficient in sending total company operating profits down 5.2% to $662 million. As has occurred in previous quarters, higher commodity costs are pushing industry profit margins down and adversely affecting key rivals that include Procter & Gamble (NYSE:PG), Unilever (NYSE:UN) (NYSE:UL) and Clorox (NYSE:CLX). Net income ended up declining 7.9% to $432 million, or $1.09 per diluted share. (To know more about margins, read: A Look At Corporate Profit Margins. )

Outlook
The need to increase selling prices and more challenging global economic growth levels, resulted in the need for management to lower its full-year sales growth projections to between 4 and 6%. Analysts currently project total sales of nearly $21 billion. The company expects earnings in a range of $4.80 and $4.90 per share, or as much as 5% growth from $4.68 per share, reported in 2010.

The Bottom Line
Investors knocked down Kimberly-Clark's share price following the earnings release, though it is still trading towards its highs over the past year. As a result, the forward P/E is slightly more reasonable at 14.3. Annual sales and profit growth have been pretty modest, in the mid-single digits, over the past five years, but offer a degree of stability that can't be matched by many other firms or industries. The dividend yield is also back at 4%, which is again hard to beat and among the highest of Kimberly-Clark's peer group, including above that of the rivals listed above. (For additional reading regarding dividend yield, check out: Dividend Yield For The Downturn. )

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.

comments powered by Disqus
Related Analysis
  1. India Remains An Emerging Market Bright Spot
    Stock Analysis

    India Remains An Emerging Market Bright Spot

  2. Still More Gains Ahead For Semiconductor Makers
    Stock Analysis

    Still More Gains Ahead For Semiconductor Makers

  3. Unconventional Drilling Still Has Room To Boom
    Stock Analysis

    Unconventional Drilling Still Has Room To Boom

  4. Finding An Alternative With Currency ETFs
    Stock Analysis

    Finding An Alternative With Currency ETFs

  5. The Key Metric Used By The Best Money Manager You've Never Heard Of
    Stock Analysis

    The Key Metric Used By The Best Money Manager You've Never Heard Of

Trading Center