Kimberly-Clark’s Revenue To Remain Flat In Q2 2019?

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A package of Kimberly-Clark Corp. Huggies brand diapers is arranged for a photograph in Princeton, Illinois, on Tuesday, Oct. 16, 2018. (Photographer: Daniel Acker/Bloomberg)

© 2018 Bloomberg Finance LP

Kimberly-Clark (NYSE: KMB) is set to announce its Q2 2019 results on July 23, 2019, followed by a conference call with analysts. The market expects the company to report revenue close to $4.6 billion in Q2 2019, which would be a decrease of 0.6% y-o-y, in line with Trefis expectations. Market expectation is for the company to report earnings of $1.61 per share in Q2 2019, up from $1.59 per share in the year-ago period.

Kimberly-Clark Revenues were reported at $18.5 billion in 2018. This included 3 main revenue streams:

  • Personal Care: $9 billion in 2018 (48.9% of Total Revenues). This includes the revenue earned by the company from its personal care items like disposable diapers, training and youth pants, swimpants, baby wipes, feminine and incontinence care products, and other related products.
  • Consumer Tissues: $6 billion in 2018 (32.5 % of Total Revenues). This includes the revenue earned from products such as facial and bathroom tissue, paper towels, napkins, and related products.
  • K-C Professional: $3.4 billion in 2018 (18.3% of Total Revenues). This includes the revenue earned from solutions and products like wipers, tissue, towels, apparel, soaps and sanitizers.

We have summarized our key expectations from the earnings announcement in our interactive dashboard – Kimberly-Clark’s Earnings: Performance and 2019 Forecast. In addition, here is more Consumer Staples data.

Key Factors Affecting Earnings:

Revenue expected to remain flat:

  • Quarterly revenue for the company has been more or less stable over the last few quarters.
  • In Q1 2019 the company recorded a revenue of $4.6 billion, down 2.1% y-o-y and Trefis estimates Q2 2019 revenue to be similar to Q1 2019.
  • Kimberly-Clark’s personal care segment is responsible for half of the company’s sales. However, the segment is witnessing volume declines in North America, due to higher competitive activity and lower category demand.
  • Kimberly-Clark has struggled to generate meaningful revenue growth of late, with stagnant revenues, primarily due to lower organic sales – reflecting a challenging growth environment. In 2019, Kimberly-Clark expects its total sales to decline 1% to 2%, including an expected 3% to 4% headwind from currencies.

Trend in Expenses:

  • The company has seen a fall from Q2 2018 in Total expenses compared to Q1 2018 due to the high Marketing, research, and general expenses in Q1 2018 compared to all other quarters.
  • Net Income Margin dipped a bit in 2018 primarily due to higher Cost of Revenue to Total Revenue (64% in 2017 to 69% in 2018). We expect it to remain in the new range for 2018.
  • Further, for full year 2019 we expect the Net Margin to increase back to around 11.7%.

Full Year Outlook:

  • For the full year, we expect gross revenue to decrease by 0.7% to $18.4 billion, because of stagnant revenues, primarily due to a challenging growth environment .
  • Net Income margin is expected to increase back to around 11.7%.

Trefis has a price estimate of $122 per share for Kimberly-Clark’s stock. The value is based on the expectation that the company’s revenue will remain nearly flat with margin increasing back to its previous levels after the fall in 2018.

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