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Earnings preview: Costs to hurt Kimberly-Clark Q1 results

Kimberly-Clark (NYSE: KMB), a manufacturer of personal care products, is scheduled to report its earnings results for the first quarter of 2019 on Monday before the market opens. The results will be hurt by a fall in personal care segment as well as will be impacted by the unfavorable foreign exchange rates given its significant international presence.

The company’s margins will be impacted by the higher input costs, which is expected to be $300 million to $400 million for 2019. The company had expected a high-single-digit adverse impact from currency for 2019. This along with high-priced commodities remained a concern for the first quarter.

Image Courtesy: Kimberly-Clark / Facebook page

Apart from this, the company’s top line will be hurt by persisting challenges in China and the heightened competition in the value segment. However, higher pricing could turn beneficial for organic sales. The bottom line could be hurt by the softness in sales, the pressure on margins, and a higher effective tax rate.

Analysts expect Kimberly-Clark’s earnings to fall by 9.40% to $1.55 per share and revenue to drop by 4.30% to $4.53 billion for the first quarter. In comparison, during the previous year quarter, the company posted a profit of $1.71 per share on revenue of $4.73 billion.

Major consumer packaged goods manufacturers including Colgate-Palmolive (NYSE: CL) and Procter & Gamble (NYSE: PG) have remained on the sidelines as this quarter’s results could be hurt by currency volatility and continued inflation in commodities. Colgate is expected to post lower top and bottom lines for the first quarter, while Procter & Gamble’s third-quarter results are likely to stay low.

Also read: Kirkland’s stock dips to 10-year low

For the fourth quarter, Kimberly-Clark posted weaker-than-expected earnings reflecting a decline in sales. The unimpressive bottom line performance and the dismal outlook for the current fiscal year triggered a selloff. Net sales declined 1% hurt mainly by a 2% decline in the personal care segment that more than offset a 2% growth in the sales of K-C Professional products.

For fiscal 2019, the company had expected a 1% to 2% decline in net sales and a 2% increase in organic sales. Adjusted earnings were anticipated to be in the range of $6.50 to $6.70 per share and adjusted operating profit was predicted to grow between 1% and 4%. The adjusted effective tax rate was seen increasing to the 23% to 25% range.

Shares of Kimberly-Clark opened higher on Wednesday and is trading in the green territory. The stock has risen over 15% in the past year and over 7% in the past three months.

 

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