– By Nathan Parsh
When discussing my funding goals for 2021, I said that I wished to focus capital on corporations that had been producing higher than anticipated monetary outcomes, offering greater than anticipated steerage, rising dividends at an above common clip and buying and selling beneath the long-term common valuation.
One firm that simply checked all of those packing containers is Kimberly-Clark Company (NYSE:KMB). As a result of the corporate met lots of my standards for buy, my spouse and I lately added to our place at $136.89. Let’s evaluate the corporate’s most up-to-date quarter to see why.
Latest earnings outcomes
Kimberly-Clark reported fourth quarter and full 12 months earnings outcomes on Jan. 25. The corporate’s income for the quarter grew 5.7% year-over-year to $4.8 billion, which topped Wall Avenue analysts’ estimates by $110 million. Adjusted earnings per share declined 1.2% from the earlier 12 months, however got here in $0.07 forward of expectations.
For the 12 months, income improved 4% to $19.1 billion. Adjusted EPS elevated 12.3% to $7.50, which was greater than the corporate’s steerage of $7.10 to $7.60.
For the quarter, volumes improved 3% whereas pricing and product combine every added 1% to outcomes. Internet earnings was down 10% as a result of a mixture of headwinds from foreign money trade, a rise in manufacturing prices, greater promoting spending and uncooked supplies inflation.
By section, the Client Tissue section grew 14% to $1.7 billion and Private Care improved 5% to $2.3 billion whereas Okay-C Skilled fell 9% to $0.7 billion. Progress for Client Tissue and Private Care had been an acceleration from the latest quarter and represented the perfect year-over-year positive aspects of 2020.
By area, North American gross sales grew 3%, principally as a result of greater volumes. The Client Tissue section was particularly robust with gross sales rising 21% as rest room tissue and paper towels posted double-digit development. Facial tissue was greater by mid-single digits. Private Care was up double-digits as a result of greater demand for grownup care, female care and child and little one care merchandise. Huggies diapers and GoodNites youth pants loved expanded market share. Okay-C Skilled, although the section was down total, really grew 5% on power in wipers and security on this area.
It was growing and rising markets the place Kimberly-Clark actually stood out as revenues grew 7% in these areas. The corporate’s latest buy of Softex Indonesia added 8% to revenues, a stout debut for the acquisition’s debut. What I discovered to be particularly optimistic was the corporate’s continued quantity development in the important thing markets of China, India and Brazil. These areas will possible be sources of development for Kimberly-Clark going ahead as they broaden their market share. Partially offsetting these positive aspects was a 9% unfavorable affect from foreign money trade.
Client Tissue was down 2% in these areas, however this was principally as a result of a 6% drag from foreign money trade charges. Volumes had been up 3%. Private Care fell 7%. Once more, foreign money was a difficulty, decreasing revenues by 9%. Okay-C Skilled was extraordinarily weak as gross sales decreased 21% with all main international locations seeing declines. The washroom product traces had been hit particularly exhausting by Covid-19.
Developed markets outdoors of the U.S, which incorporates Australia, South Korea and Western/Central Europe, had been greater by 6%. Foreign money trade was really a 5% profit to outcomes. Quantity development of two% was offset by decrease web promoting costs and product combine. Client Tissue had gross sales development of 12%, evenly break up between greater volumes and foreign money trade tailwinds. Private Care was greater by 6%, principally as a result of power in China, India and South Africa. Okay-C Skilled was down 2% as will increase in pricing and favorable foreign money trade wasn’t sufficient to offset double-digit declines in volumes.
Companywide natural development grew 5% and 6% for the quarter and 12 months, respectively. Natural development really got here in forward of the corporate’s estimates of 4% to five% for the 12 months following third quarter outcomes.
Shares of Kimberly-Clark had retreated following the final quarter as buyers took steerage to imply that a lot of the profit from Covid-19 had already occurred. This was an affordable response on the time provided that Kimberly-Clark had seen stable development charges in its two largest companies, however the fourth quarter’s outcomes had been the perfect of the 12 months.
Total, the quarter and 2020 had been fairly good for Kimberly-Clark. The corporate elevated or maintained market share in roughly 60% of its 80-product class and nation mixtures. Adjusted working margin grew 110 foundation factors to 18.7% whereas adjusted gross margins had been up 210 foundation factors to 37.1%. Full 12 months money from operation grew 36% to $3.7 billion and the corporate repurchased 4.9 million shares.
Kimberly-Clark introduced a 6.5% dividend enhance, marking the forty ninth consecutive 12 months that the corporate has raised its dividend. The corporate has elevated its dividend with a compound annual development charge of 4.5% during the last decade. On the similar time, the corporate approved a brand new $5 billion share repurchase program along with the present $5 billion authorization that’s anticipated to be accomplished earlier than the tip of the 12 months. I take into account Kimberly-Clark to be one of many extra shareholder pleasant corporations and the dividend enhance and share repurchase authorization assist this.
Kimberly-Clark believes that a lot of the positive aspects made in 2020 will proceed into 2021. Internet gross sales are projected to extend 4% to six% with natural development in a spread of 1% to 2%. The anticipated natural development charge is decrease than what the corporate produced in 2020, however nonetheless stable take into account the upper comparable base that Kimberly-Clark faces within the coming 12 months.
The corporate additionally expects adjusted EPS in a spread of $7.75 to $8.00 for 2021. For context, analysts surveyed by Yahoo Finance count on that the corporate will earn $7.78 in 2021.
Utilizing our buy value and the midpoint for anticipated EPS for the 12 months, shares traded with a ahead price-earnings ratio of 17.4. The inventory has a mean price-earnings ratio of 21.1 over the previous decade.
The fourth quarter confirmed an accelerated development charge for Client Tissue, and Private Care returned to mid-single-digit development. The corporate’s Okay-C Skilled enterprise was weak, however that is principally as a result of weaker demand for merchandise, particularly within the washroom product line. Thankfully, that is the smallest enterprise throughout the firm. Kimberly-Clark does count on natural development in 2021, which is good news as a result of comparatively excessive charges that had been seen in 2020.
Whereas the inventory declined following a tempered outlook on the time of the third quarter, the corporate’s outcomes had been effectively obtained by the market this time round because the inventory climbed as a lot as 6.6% following the earnings launch.
Kimberly-Clark topped estimates within the fourth quarter, offered steerage above consensus estimates for the present 12 months, introduced the next than common dividend enhance and shares commerce with a decrease than common ahead price-earnings ratio. For these causes, we felt comfy including to our place within the firm.
Creator disclosure: the creator maintains an extended place in Kimberly-Clark.
Learn extra right here:
Not a Premium Member of GuruFocus? Join a free 7-day trial right here.
This text first appeared on GuruFocus.