Wednesday, February 1, 2023
HomeMarketKimberly-Clark Stock Is Lower. The Earnings Outlook Disappointed.

Kimberly-Clark Stock Is Lower. The Earnings Outlook Disappointed.

Inflation has been hurting Kimberly-Clark’s profits as input costs increase.

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Chris Ratcliffe/Bloomberg

Kimberly-Clark
stock is lower in premarket trading on Wednesday after the consumer-products giant provided weaker-than-expected guidance that overshadowed a mixed fourth-quarter report.

Kimberly-Clark
(ticker: KMB), said 2023 earnings per share will rise 2% to 6%. However, analysts polled by FactSet had projected earnings per share of $6.48 for 2023. This represents a 15% rise from the company’s 2022 earnings per share of $5.63, which was 1 cent above expectations. The maker of Kleenex and Huggies said 2023 sales would be flat to up 2% from 2022’s $20.18 billion; analysts had expected 2023 sales of $20.38 billion, which is within Kimberly-Clark’s projection.

Blame costs, which will remain an issue throughout 2023. Production costs are expected to increase between $200 million and $300 million, while exchange rates will reduce profit by up to $400 million, the company said.

Kimberly-Clark also posted adjusted fourth-quarter earnings of $1.54 per share, narrowly topping estimates for $1.51, while revenue came in at $4.96 billion, shy of forecasts for $4.99 billion.

Fourth-quarter profits continued to be hurt by inflation, with higher prices for production materials causing a $245 million dent in profit, the company said.

“We mitigated inflationary pressures with successful revenue growth management initiatives and maintained cost discipline while continuing to invest in our business,” said Kimberly-Clark CEO Mike Hsu in the earnings press release.

The company didn’t immediately respond to a request for comment on the disappointing outlook.

Kimberly-Clark stock is down 3.6% to $129.91 on Wednesday, while the
S&P 500
was 1.2% lower.

Inflation has been a nagging problem for Kimberly Clark for several quarters, impacting all its business segments, including consumer tissue, personal care, and professional.

So far, the company has been able to offset some of those costs by raising prices for their end products. Net selling prices rose approximately 10% in the fourth quarter, the company said. Higher prices have also helped Kimberly Clark overcome weakness in sales volume, which declined 7% in the quarter.

“Input costs have had a significant impact on KMB in 2022,” wrote RBC Capital Markets analyst Nik Modi ahead of the company’s earnings report. “While resin costs and U.S. gas prices have continued to decline sequentially since Q2’22, EU energy costs have remained elevated throughout the winter. Further, pulp prices seem to have moderated, but they have leveled out at a high price.” He had a Sector Perform rating on Kimberly-Clark stock with a $118 price target.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

Credit: marketwatch.com

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