Kimberly-Clark Corp.’s stock held flat early Tuesday before falling 2.3%, after the consumer-goods company posted stronger-than-expected profit for the third quarter but sales that fell slightly short of estimates.
The parent
KMB,
to consumer brands including Huggies diapers and Scott and Kleenex tissues again raised prices, helping restore its gross margin to prepandemic levels.
But overall, the cost environment “remains mixed,” Chief Financial Officer Nelson Urdaneta said on the company’s earnings call with analysts, “with favorability in raw materials offset by higher energy prices, currency headwinds and higher labor costs.”
He added that “other manufacturing costs were $30 million higher than last year.”
Higher energy costs and the recent strengthening of the dollar against the Argentine peso and other currencies have emerged as key themes this earnings season.
Kimberly Clark is expecting currency to have a negative impact of about 300 basis points on its sales and a profit headwind of about $450 million for the full year, up from a prior forecast of $300 million to $400 million for the year.
See also: Procter & Gamble’s earnings include a familiar refrain. The strong dollar is creating big headwinds.
Related: Procter & Gamble earnings rise as company again lifts prices and boosts margins
Overall costs are coming down, however. Input costs are facing a headwind of about $50 million, which is down from prior guidance of $100 million.
The company expects that to continue in the fourth quarter and will push ahead with revenue management and a cost-cutting program, according to Chief Executive Mike Hsu.
Hsu, who earlier this year flagged innovation in the “poop” category, said the company has launched a line of Huggies in China that “whisks away” both urine and solid waste to reduce the frequency of diaper rash.
And in North America, it has launched a new line of Poise 7-drop Ultra Absorbency and 8-drop overnight adult diapers that offer better absorbency than day pads.
The company posted net income of $587 million, or $1.73 a share, in the third quarter, up from $467 million, or $1.38 a share, in the year-earlier period.
Adjusted per-share earnings came to $1.74, ahead of the $1.60 FactSet consensus.
Sales rose 2% to $5.132 billion from $5.053 billion, just below the $5.157 billion FactSet consensus.
Sales in the company’s personal-care segment rose 3% and volume was up 2% as the company raised prices by 4%. Sales in consumer tissue fell 1%, while volume fell 4% and prices were raised by 5%.
In the professional segment, sales rose 4%, while volumes fell 6% and prices were raised by 9%.
Gross margin came to 35.8%, up 530 basis points from a year ago.
The company raised its full-year guidance and now expects adjusted EPS growth of 15% to 17%, up from prior guidance of 10% to 14%.
The stock has fallen 12% in the year to date, while the S&P 500
SPX
has gained 10%.
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