Kimberly Clark Corporation KMB released its first quarter 2022 results, with net income declining year over year and beating Zacks’ consensus estimate. The top line rose and broke the consensus mark. Sales increased across all reporting segments of the business. Management also raised its net sales and organic sales guidance for 2022. That said, a strong inflationary environment is cause for concern.
Price from KimberlyClark Corporation and surprise EPS
KimberlyClark Corporation price-eps-surprise | Quote from Kimberly Clark Corporation
Quarter in detail
Adjusted earnings came in at $1.35 per share, beating Zacks’ consensus estimate of $1.23. However, net income was down 25% from $1.80 per share in the prior year quarter.
Kimberly-Clark’s sales were $5,095 million, beating Zacks’ consensus estimate of $4,917.3 million. The metric is up 7% year over year. Unfavorable exchange rates affected sales by 2%. Organic sales increased by 10%, with net selling prices up 6%, volumes up 2% and product mix sales up 2 points.
In North America, organic sales of consumer products increased 13% year over year, while they increased 5% in the KC Professional segment. Outside of North America, organic sales increased 10% in developing and emerging (D&E) markets. The metric rose 8% in developed markets.
Adjusted operating profit was $629 million, compared to $804 million in the year-ago quarter, driven by higher input costs of $470 million. An increase in the costs of pulp and polymer-based materials, distribution and energy led to higher input costs. Escalating marketing, research and general expenses and an unfavorable foreign exchange rate also affected operating profit. These were somewhat offset by organic sales growth, lower other manufacturing costs and savings of $50 million from the FORCE (Focused On Reducing Costs Everywhere) program.
Personal care: Sales of $2,729 million increased 11% year over year. Net selling prices increased by 8%, volumes increased by 3% and the product mix increased by 3 points. Unfavorable exchange rates hurt sales by almost 2%. Sales increased 16% in North America and 8% in D&E markets. The metric increased by 5% in developed markets outside of North America, including Australia, South Korea and Western/Central Europe.
Consumer fabric: Segment sales of $1,568 million increased 4% year-over-year. Net selling prices improved sales by 5% and volumes increased by 2 points. Unfavorable exchange rates reduced sales by 2%, while discontinued operations related to the 2018 global restructuring program hurt sales by 1%. Sales increased 9% in North America, while the metric increased 3% in D&E markets. The metric fell 5% in developed markets outside of North America.
KC Professional (KCP): Segment sales increased 4% to $780 million. Net selling prices improved by 4% and the product mix benefited sales by almost 1 point. Changes in exchange rates hurt sales by 2%. Sales increased 5% in North America, while sales increased 4% in D&E markets. The measure remained unchanged year over year in developed markets outside of North America.
Other Financial Updates
The company ended the quarter with cash and cash equivalents of $493 million, long-term debt of $8,101 million and total equity of $854 million. Kimberly-Clark generated cash flow from operating activities of $204 million during the three months ended March 31, 2022. Management incurred capital expenditures of $253 million.
Kimberly-Clark repurchased 0.2 million shares for $27 million during the quarter under review.
In the first quarter of 2021, Kimberly-Clark acquired a majority and majority stake in Thinx Inc. – a well-known company in the reusable and incontinence underwear category for $181 million. Management presents the consolidated operating results of Thinx in its Personal Care unit.
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Net sales in 2022 are now expected to grow 2-4% year over year. The company previously expected the metric to grow 1-2% in 2022. Organic sales are now expected to grow 4-6%, up from previous forecasts of 3-4% growth. Management expects net selling prices to be higher. Unfavorable exchange rates are likely to hurt sales by approximately 2%. Additionally, the recently concluded Thinx takeover will slightly increase sales.
Management expects adjusted operating profit to decline to a mid-single digit percentage. Nevertheless, the increase in organic sales should contribute to operating profit.
Major input costs are now estimated to increase by $1.1 billion to $1.3 billion. Previously, the metric was likely to increase by $750-900 million. Management expects costs to increase or remain high for most inputs such as polymer materials and pulp as well as distribution and energy. The company still expects earnings per share (EPS) of $5.60 to $6.00 for 2022.
Zacks Rank #4 (Sell) stock is down 9.6% over the past three months, compared to an 8.1% decline in the industry.
3 hot base bets
Some higher ranked stocks are Inter Parfums, Inc. IPAR, McCormick & Company MKC and Sysco Company SYY.
Inter Parfums develops, manufactures and distributes prestigious perfumes and cosmetics. He currently wears a Zacks Rank #2 (Buy). Inter Parfums has a surprise on the profits of the last four quarters of 46.7%, on average. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks consensus estimate for current year sales and EPS from IPAR suggests growth of 12.5% and 10.9%, respectively, over prior year period figures .
McCormick is a leading manufacturer, marketer and marketer of spices, seasonings, specialty foods and flavors. He currently wears a No. 2 Zacks rank.
Zacks’ consensus estimate for McCormick’s current-year sales and EPS suggests growth of 5% and 3.9%, respectively, from numbers reported a year ago. MKC has a last four quarter earnings surprise of 7.3% on average.
Sysco, the distributor and marketer of food and related products, currently offers a Zacks #2. SYY has a last four quarter earnings surprise of 3.7% on average.
Zacks’ consensus estimate for Sysco’s current-year sales and earnings suggests growth of 30.4% and 120.1%, respectively, over reported figures for the corresponding period of the year previous.
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