Kimberly-Clark Is A Stock You Can Own Forever
We have highlighted Kimberly-Clark (NYSE:KMB) as a stock you can own forever on more than one occasion. The company offers value, a safe dividend, and growth in a well-established bluechip name. The latest earnings release not only confirms that thesis but also adds to it as revenue, earnings, and guidance all exceeded the consensus estimates. With shares trading near their 9-month lows and showing signs of support and the results in support of the move, it looks like we’ve got another buying opportunity in this consumer staples stock.
Kimberly-Clark Grows, Beats, And Guides Higher
Kimberly-Clark reported a great 4th quarter and one that has shares moving higher in early trading. The company’s $4.84 billion in revenue is 3.4% higher than the previous quarter and 5.7% higher than last year beating the consensus by 230 basis points. The strength in sales was driven by a strong 5% increase in organic sales that was amplified by the Softex Indonesia acquisition. The Softex acquisition added about 2.0% to the topline result that was in turn reduced by half due to FX headwinds.
On a regional basis, developed markets outperformed emerging markets but both showed growth. The developed markets posted organic growth of 11% versus a more tepid 3.0% in developing and emerging markets. On a segment basis, Personal Care saw its revenue rise 5% while Consumer Tissue rose 14% and K-C Profesional fell -9.0%.
Moving down the report, revenue strength carried through to the bottom line but results reflect an expect uptick in costs. Input costs alone rose by $40 million and were compounded by COVID-related expenses, the Softex acquisition, and higher ad-spend. The decrease in margin is a concern but most items are one-time and/or will lead to accelerated growth in future quarters. On the bottom line, the GAAP eps of $1.58 beat by $0.15 while adjusted earnings of $1.69 beat by $0.07 to hold flat from last year.
Looking forward, the company is guiding revenue growth in the range of 4.0% to 6.0% with adjusted EPS of $7.75 to $8.00. The analyst’s consensus is expecting 2.5% revenue growth with EPS in the range of $7.78.
Kimberly-Clark Posts Record Cash Flow
Kimberly-Clark’s cash flow declined in the 4th quarter due to the previously mentioned cost increases but not enough to hurt. The company posted $3.729 billion in cash flow for the fiscal year which is an all-time record by more than $1.0 billion. The cash flow is being put to good use including the company’s turnaround plan, growth strategy, acquisitions, buybacks, and dividends.
Regarding growth, the analysts are targeting mid-single-digit EPS and low-single-digit revenue growth for the next 3 to 5 years and management is already guiding those figures higher. Add in the chances for additional acquisitions and those figures will increase again. As for buybacks, the company repurchased 1.7 million shares over the last quarter for roughly $243 million and just approved another $5 billion buyback plan. Looking at the dividend, the company’s 3.45% yield is backed up by a strong balance sheet, a manageable 55% payout ratio, and ample free cash flow so nothing to worry about.
The Technical Outlook: Kimberly-Clark Puts In A Bottom
Shares of KMB surged nearly 5% in early trading to confirm support at the short-term moving average and a possible reversal at the $130 level. The reversal is a double-bottom that has yet to break the baseline. The baseline is near the $140 to $143.50 level and may provide stiff resistance in the near-term. Longer-term, assuming resistance at the baseline is broken, a move up to retest 2020’s highs should be expected.
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