Kimberly-Clark (KMB) Retests Support on Earnings Outlook

Kimberly-Clark Corporation (KMB) shares fell more than 4% during Thursday's session after the maker of Kleenex and other paper products reported mixed third quarter financial results. Revenue rose 0.9% to $4.68 billion during the third quarter, beating consensus estimates by $90 million, but non-GAAP earnings came in at $1.72 per share, missing consensus estimates by $0.01 per share.

Key Takeaways

  • Kimberly-Clark shares fell more than 4% during Thursday's session after the company reported mixed third quarter financial results.
  • Full-year guidance came in below consensus estimates, although the consensus was higher than the company's own prior estimates.
  • The stock's relative strength index (RSI) is approaching oversold levels, but the moving average convergence divergence (MACD) suggests that the interim trend remains bearish.

Kimberly-Clark reported organic sales that rose 3% in developed markets and 1% in developing and emerging markets. In addition, the company achieved $140 million in cost savings and returned $560 million to shareholders through dividends and share repurchases. However, full-year guidance came in below expectations, sending shares lower during the session.

Last week, JPMorgan downgraded Kimberly-Clark stock from Overweight to Neutral with a $163 price target, saying that multiple rerating of shares will be harder given the lap of the COVID-19 benefit ahead and that the shares may be trading close to fair value after a strong run.

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

From a technical standpoint, the stock fell sharply below its 200-day moving average at $141.53 before regaining some ground by mid-day. The RSI fell near oversold levels with a reading of 30.81, but the MACD experienced a bearish crossover that could suggest more downside ahead. These indicators suggest that the stock could consolide before moving lower.

The crossover is a point on the trading chart in which a security's price and a technical indicator line intersect, or when two indicators themselves cross. Crossovers are used to estimate the performance of a financial instrument and to predict coming changes in trend, such as reversals or breakouts.

Traders should watch for consolidation near the 200-day moving average at $141.53 over the coming sessions. If the stock breaks down from these levels, traders could see a move to retest reaction lows at $135.50. If the stock breaks out higher, traders could see a move to reaction lows of $144.50 or a closing of the gap at $147.50.

The Bottom Line

Kimberly-Clark shares moved sharply lower during Thursday's session after the company reported mixed third quarter financial results and below-consensus guidance.

The author holds no position in the stock(s) mentioned except through passively managed index funds.

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