Kimberly-Clark Earnings Surprise Lifts Household Products Stocks

The company plans to reinstate its buyback program this year

Kimberly-Clark Corporation (KMB) shares rose over 2% Thursday after the household products company reported better-than-expected second quarter (Q2) results. The firm behind Huggies and Kotex posted adjusted earnings of $2.20 per share, easily surpassing Wall Street expectations of $1.80 per share. Meanwhile, revenue of $4.61 billion came in 3.4% above the consensus estimate. Not surprisingly, the bottom line was boosted by the company's consumer tissue segment, which grew 12% from a year earlier amid ongoing demand for toilet paper throughout the pandemic.

Management expects full-year earnings per share (EPS) of between $7.40 and $7.50, up from its previous forecast range of between $7.10 and $7.35. The company also announced that it plans to reinstate its share repurchase program, intending to buy back $700 million to $900 million of its stock this year. The move indicates an improving outlook for the industry in the second half, which bodes well for other household products stocks.

From a technical standpoint, Kimberly-Clark shares broke out above crucial overhead resistance at $145 after the company delivered its encouraging financial results. The breakout, which occurred on above-average volume, places the stock at an all-time high, with the potential for further momentum-based buying. Short-term tactical traders could use a trailing candlestick stop to exit their position. To implement this technique, raise the stop order under the current day's low or the previous day's low, depending on risk tolerance. Simply stay in the trade until stopped out.

Chart depicting the share price of Kimberly-Clark Corporation (KMB)

Below, we take a closer look at two other large-cap household products stocks that rallied in sympathy on the back of Kimberly-Clark's stellar earnings.

Church & Dwight Co., Inc. (CHD)

Church & Dwight Co., In. (CHD) sells personal care and specialty products in the United States and globally. Wall Street expects the 174-year-old company to report a 24% decline in Q2 earnings when it posts results on July 31. Last month, Credit Suisse analyst Kaumil Gajrawala upgraded Church & Dwight stock to "outperform" saying the firm's operating model suits the current environment. He argues that the company's portfolio can survive a recession, with roughly 37% of sales derived from value-priced brands. Gajrawala also believes that the current landscape provides an opportunity for further acquisitions. Trading at $86.22, with a market capitalization of $21.2 billion and offering a 1.13% dividend yield, the stock has returned 23.26% on the year, outperforming the household and personal products industry average by nearly 20% as of July 24, 2020.

Church & Dwight stock broke above a multi-year trading range earlier this month, with gains consolidating over the past two weeks. Price regained its upside momentum Thursday after Kimberly-Clark's upbeat earnings to register a new all-time high. Those who enter here should consider using an overlay indicator, such as the 10-day simple moving average (SMA), as a trailing stop. For instance, traders would remain in the trade until the stock closes below the indicator.

Chart depicting the share price of Church & Dwight Co., Inc. (CHD)

Newell Brands Inc. (NWL)

With a market value of $7.25 billion, Newell Brands Inc. (NWL) markets and distributes commercial products. The company's food and commercial segment saw net sales climb 3.2% year over year in the first quarter thanks to pandemic-related demand for home storage products and commercial cleaning and maintenance solutions. Analysts expect the home products maker to post Q2 EPS of 15 cents when it discloses financial results on July 31. Although Newell Brands stock is trading 8.69% lower year to date, it has gained 37.5% in the past three months. Investors also receive a healthy 5.5% dividend yield.

Newell shares made an impulsive wave higher in mid-May but have traded within a symmetrical triangle since. Price finally broke above the pattern's top trendline Thursday in a move that could initiate the next wave higher. Swing traders who execute a long position at these levels should set a take-profit order near $20, where the price may run into resistance from a prominent double top formed between November and February. Protect capital by placing a stop just below the 200-day SMA.

Chart depicting the share price of Newell Brands Inc. (NWL)
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