Kimberly Clark Corp (NYSE: KMB) has been downgraded to neutral at Goldman Sachs after analysts determined that its buy stock recommendation “has not been successful.” The 12-month price target was lowered to $119.
On the other hand, the stock slightly rose by over 0.3% today, and already trading at $114.6 (as of 9 Oct, 10:05 AM GMT-4; Source: Google finance), which is below goldman sachs target price.
The personal care organic sales momentum could sustain and pulp cost pressure was poised to abate was proved flawed. Eucalyptus pulp prices have gone up 36% and personal care organic sales growth has slowed. The company has effectively top-ticked Kimberly-Clark’s personal care organic sales performance and did not anticipate the competitive pressure that built from P&G in the U.S., which is a proliferation of challenger brands in China and value offerings in Brazil. Though costs should level off, the personal care space is still “challenging” with lower birth rates in the U.S. hurting the diaper business, and business in China decelerating in brick-and-mortar channels.
Meanwhile, KMB has notified the customers in the U.S. and Canada of plans to increase net selling prices across a majority of its North America consumer products businesses. The increases will be implemented through changes in list prices and package counts and are necessary to help offset significant commodity cost inflation. The percentage increases are generally in the mid-to-high single digits on average and will mostly impact Cottonelle and Scott 1000 bathroom tissue, Kleenex facial tissue, Viva paper towels, Huggies diapers, Pull-Ups training pants and GoodNites youth pants. The increases on Cottonelle bathroom tissue and Viva paper towels will occur in the fourth quarter of 2018 while most of the remaining increases will occur in the first quarter of 2019.
On the other hand, KMB is now targeting full-year 2018 adjusted earnings per share of $6.60 to $6.80, a year-on-year increase of 6 to 9 percent. The company’s prior target was $6.90 to $7.20. The update reflects higher commodity inflation along with a worse currency outlook, partially offset by increased cost savings and reduced overhead spending.
In January 2018, Kimberly-Clark initiated the 2018 Global Restructuring Program in order to reduce the company’s structural cost base and enhance the company’s flexibility to invest in its brands, growth initiatives and capabilities critical to delivering future growth. The company expects the program will generate annual pre-tax cost savings of $500 to $550 million by the end of 2021, driven by workforce reductions along with manufacturing supply chain efficiencies. As part of the program, Kimberly-Clark expects to exit or divest some low-margin businesses that generate approximately 1 percent of company net sales. The sales are concentrated in the consumer tissue business segment. To implement the program, the company expects to incur restructuring charges of $1,700 to $1,900 million pre-tax ($1,350 to $1,500 million after tax) by the end of 2020