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Will Kimberly-Clark’s Strategic Efforts Help Gain Momentum?

Zacks

Kimberly-Clark Corporation KMB has been gaining momentum and is well-positioned in the consumer product categories on the back of strong brand portfolio and constant innovation.

Coming to the company’s financial performance, Kimberly-Clark posted better-than-expected earnings for the second time when it reported first-quarter 2017 results. Cost-containment efforts, improved operating profits, currency tailwinds and lower taxes impacted the bottom line favorably in the reported quarter. (Read more: Kimberly-Clark Tops Q1 Earnings on Favorable Currency)

However, revenues lagged the Zacks Consensus Estimate and remained flat year over year. In fact, the company’s top line missed the same in seven of the past eight quarters. Higher volumes were offset by the decline in net selling prices.

The company’s costs-cutting initiative called FORCE program coupled with its restructuring endeavors seems to be encouraging. In 2017, management expects cost savings of at least $400 million from the FORCE program. Evidently, it achieved $110 million of cost savings in the first quarter of 2017.

Though we note that Kimberly-Clark is well positioned overseas, the company has been witnessing slower organic sales growth, especially in the developing and emerging markets. The company has strong long-term growth prospects in these markets, however, the current promotional environment is weakening the market dynamics now. Furthermore, input cost inflation and stiff competition especially in the diapers segment remain headwinds.

We note estimates have witnessed downward revisions over the past 30 days. In the said time period, the Zacks Consensus Estimate of $1.51 and $6.29 for the second quarter and 2017 has declined by 2 cents and 1 cent, respectively. The company’s reiterated earnings guidance for 2017 is in the band of $6.20–$6.35 per share.

If we look into the share price performance of Kimberly-Clark, we note that the company is performing almost in-line with the industry. This Zacks Rank #3 (Hold) stock rallied 12.6% in the past six months compared with the Zacks categorized Consumer Products-Miscellaneous Staples industry’s gain of 11.4%. Notably, the industry is currently placed at top 14% (35 out of 256) of the Zacks Classified industries.



Stocks to Consider

Better-ranked stocks in the same industry include Ollie's Bargain Outlet Holdings OLLI, Energizer Holdings, Inc. ENR and Tupperware Brands Corp. TUP.

Ollie's Bargain, with a long-term earnings growth rate of 17.1% has surged 35.9% year to date. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Energizer carries a Zacks Rank #2 (Buy) and rose 26.9% in the last six months. Also, it has a long-term earnings growth rate of 9.8%.

Tupperware Brands, a Zacks Rank #2 stock has jumped 38.9% year to date. Also, it has a long-term earnings growth rate of 12%.

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