Tickers in this Article: KMB, PG, UN, UL, CLX
Consumer products giant Kimberly-Clark (NYSE:KMB) reported disappointing first quarter earnings results on Monday. The stock fell as a result, but has pushed the stated dividend yield further above the levels that archrivals currently pay. TUTORIAL: Economic Indicators To Know

First Quarter Recap
Sales increased a modest 4% to $5 billion. Organic growth and positive foreign currency fluctuations each accounted for two percentage points of the increase. Management stated that the organic improvement was due to higher sales volumes and also pointed out that this was "in line with our full-year plan, as we continue to benefit from innovation and targeted growth initiatives."

Sales rose in all four divisions and was strongest in health care (7.7% of total quarterly sales), which sells disposable medical products including surgical gowns, masks, and gloves, posting a 5.7% top-line increase. This was followed by a 5.2% increase in professional sales (15.3%) of its products, 4.2% rise in consumer tissue products (33.3%) that include Scotts, Kleenex, Cottenelle, and modest 2.3% improvement in personal care (43.7%) and for flagship products that include Huggies and Pull-Ups and compete with Procter & Gamble's (NYSE:PG) Pampers brand.

Operating Profits
Operating profit was severely hampered by rising commodity prices and fell 18.2% on a consolidated basis to $544 million. Every unit save for professional, which fell in the low single digits, posted a double-digit profit decline. Lower income tax expense helped temper the net income decrease to 8.5% as earnings fell to $350 million. Share buybacks helped per-share results fall only 6.5% to $0.86 per diluted share. Backing out restructuring charges that management deemed to be one time in nature, adjusted earnings were $1.09 and fell below analyst projections.

Management lowered the low end of its earnings guidance range and now expects the bottom line to be between $4.80 and $5.05 per share. Analysts currently project full-year sales will rise about 4% to $20.6 billion.

Bottom Line
Shares of Kimberly Clark fell a couple of percent after the earnings release and now trade at a 12.7 times earnings expectations, if it hits the high end of its guidance. This is at the low end of its earnings multiple range over the last five years and represents a decent entry point for income-minded investors. The current dividend yield is 4.2% and well above that of rivals. P&G currently sports a yield of 3.3%, Unilever (NYSE:UN) (NYSE:UL) is at 2.90%, and Clorox (NYSE:CLX) is at 3.20%.

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

comments powered by Disqus

Trading Center