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Kimberly-Clark (KMB) Benefits From Growth Pillars & Cost Cutting
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Focus on three key strategic growth pillars is favoring Kimberly-Clark Corporation (KMB - Free Report) . The consumer products company is benefiting from K-C Strategy 2022. Management has been taking robust steps to lower costs amid rising inflationary headwinds.
Let’s delve deeper.
What’s Working Well for Kimberly-Clark?
Kimberly-Clark is committed to its three key strategic growth pillars — improving core business in developed markets, speeding up growth in the Personal Care segment in developing and emerging markets and enhancing digital and e-commerce capacities. The company expects to meet these objectives through product development across different categories and leveraging capabilities in marketing and sales.
The company has been progressing well with expanding global business. In February 2022, Kimberly-Clark acquired a majority stake in Thinx, Inc. — the pioneer in the reusable period and incontinence underwear category. In October 2020, Kimberly-Clark completed the acquisition of Softex Indonesia — a leading player in the Indonesian personal care market. Recently, Kimberly-Clark entered into an agreement to sell its Neve tissue brand in Brazil and related consumer and KCP tissue assets to Suzano. Management expects to conclude the deal during the first half of 2023. The move will allow the company to focus on widening its higher-growth Personal Care business across Brazil while crafting a better future for the Consumer Tissue business across Brazil.
Image Source: Zacks Investment Research
Cost Hurdles on the Way
Kimberly-Clark is battling high input costs for the past few quarters. In the third quarter of 2022, the company’s gross margin came in at 30.5%, almost flat compared with the adjusted gross margin reported in the year-ago quarter. Gross margin was affected by major input cost inflation.
Kimberly-Clark reported an adjusted operating profit of $745 million in the third quarter of 2022. The operating profit declined due to a rise in input costs to the tune of $360 million. Reduced volumes, escalated marketing, research and general expenses and unfavorable foreign currency also affected the operating profit. The company expects input cost inflation of $1.4-$1.6 billion for the full year.
While input costs are expected to flare up, management is aggressively cutting costs and enhancing supply-chain productivity through the Focus on Reducing Costs Everywhere or FORCE Program. The program has been generating solid cost savings for a while, which is driving performance. During the third quarter of 2022, the company generated savings of $80 million from the FORCE program, bringing year-to-date program savings to $175 million. Management is maintaining its cost savings from the FORCE program in the range of $300-$350 million in 2022. Considering the inflationary supply chain environment, management expects savings to have been at the lower end of the range.
Shares of the Zacks Rank #3 (Hold) company have increased 25.7% in the past three months compared with the industry’s 8.9% growth.
Conagra Brands, operating as a consumer-packaged goods food company, currently sports a Zacks Rank of 1 (Strong Buy). CAG has a trailing four-quarter earnings surprise of 8.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Conagra Brands’ current financial year sales and earnings suggests growth of 5.8% and 11%, respectively, from the corresponding year-ago reported figures.
Campbell Soup, which manufactures and markets food and beverage products, currently sports a Zacks Rank of 1. CPB has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Campbell Soup’s current financial-year sales and earnings suggests growth of 8.2% and 4.9%, respectively, from the corresponding year-ago reported figures.
Mondelez, which manufactures, markets, and sells snack food and beverage products, currently carries a Zacks Rank #2 (Buy). Mondelez has a trailing four-quarter earnings surprise of 6.4%, on average.
The Zacks Consensus Estimate for MDLZ’s current financial-year sales suggests an increase of 8.7% from the year-ago reported number, while earnings indicate 2.4% growth.
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Kimberly-Clark (KMB) Benefits From Growth Pillars & Cost Cutting
Focus on three key strategic growth pillars is favoring Kimberly-Clark Corporation (KMB - Free Report) . The consumer products company is benefiting from K-C Strategy 2022. Management has been taking robust steps to lower costs amid rising inflationary headwinds.
Let’s delve deeper.
What’s Working Well for Kimberly-Clark?
Kimberly-Clark is committed to its three key strategic growth pillars — improving core business in developed markets, speeding up growth in the Personal Care segment in developing and emerging markets and enhancing digital and e-commerce capacities. The company expects to meet these objectives through product development across different categories and leveraging capabilities in marketing and sales.
The company has been progressing well with expanding global business. In February 2022, Kimberly-Clark acquired a majority stake in Thinx, Inc. — the pioneer in the reusable period and incontinence underwear category. In October 2020, Kimberly-Clark completed the acquisition of Softex Indonesia — a leading player in the Indonesian personal care market. Recently, Kimberly-Clark entered into an agreement to sell its Neve tissue brand in Brazil and related consumer and KCP tissue assets to Suzano. Management expects to conclude the deal during the first half of 2023. The move will allow the company to focus on widening its higher-growth Personal Care business across Brazil while crafting a better future for the Consumer Tissue business across Brazil.
Image Source: Zacks Investment Research
Cost Hurdles on the Way
Kimberly-Clark is battling high input costs for the past few quarters. In the third quarter of 2022, the company’s gross margin came in at 30.5%, almost flat compared with the adjusted gross margin reported in the year-ago quarter. Gross margin was affected by major input cost inflation.
Kimberly-Clark reported an adjusted operating profit of $745 million in the third quarter of 2022. The operating profit declined due to a rise in input costs to the tune of $360 million. Reduced volumes, escalated marketing, research and general expenses and unfavorable foreign currency also affected the operating profit. The company expects input cost inflation of $1.4-$1.6 billion for the full year.
While input costs are expected to flare up, management is aggressively cutting costs and enhancing supply-chain productivity through the Focus on Reducing Costs Everywhere or FORCE Program. The program has been generating solid cost savings for a while, which is driving performance. During the third quarter of 2022, the company generated savings of $80 million from the FORCE program, bringing year-to-date program savings to $175 million. Management is maintaining its cost savings from the FORCE program in the range of $300-$350 million in 2022. Considering the inflationary supply chain environment, management expects savings to have been at the lower end of the range.
Shares of the Zacks Rank #3 (Hold) company have increased 25.7% in the past three months compared with the industry’s 8.9% growth.
3 Solid Food Picks
Some better-ranked stocks are Conagra Brands (CAG - Free Report) , Campbell Soup (CPB - Free Report) and Mondelez International (MDLZ - Free Report) .
Conagra Brands, operating as a consumer-packaged goods food company, currently sports a Zacks Rank of 1 (Strong Buy). CAG has a trailing four-quarter earnings surprise of 8.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Conagra Brands’ current financial year sales and earnings suggests growth of 5.8% and 11%, respectively, from the corresponding year-ago reported figures.
Campbell Soup, which manufactures and markets food and beverage products, currently sports a Zacks Rank of 1. CPB has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Campbell Soup’s current financial-year sales and earnings suggests growth of 8.2% and 4.9%, respectively, from the corresponding year-ago reported figures.
Mondelez, which manufactures, markets, and sells snack food and beverage products, currently carries a Zacks Rank #2 (Buy). Mondelez has a trailing four-quarter earnings surprise of 6.4%, on average.
The Zacks Consensus Estimate for MDLZ’s current financial-year sales suggests an increase of 8.7% from the year-ago reported number, while earnings indicate 2.4% growth.