Kimberly-Clark Misses Expectations – Analyst Blog

Kimberly-Clark Corporation (KMB) reported a 17.9% year-over-year growth in first quarter earnings to $480 million, or $1.14 per share, from $407 million or 98 cents per share in the year-ago period. However, the reported EPS missed the Zacks Consensus Estimate of $1.15 per share.

 

During the quarter, net sales grew 7.6% to $4.84 billion primarily due to the positive impact of foreign currency translation coupled with higher sales volume and increased net selling prices. Moreover, sales were also helped by the acquisition of I-Flow Corp. (a health care company that develops and markets drug delivery systems and products) and Jackson Products Inc. (a privately held safety products company) during 2009.

 

In terms of segments, Personal Care division grew 8.1% year-over-year to $2.14 billion, Consumer Tissue segment rose by 2.0% to $1.61 billion, K-C Professional (KCP) division increased 12.1% to $730 million, while Health Care division recorded a growth of 23.2% to $367 million.

 

Gross profit increased 13.3% year-over-year to $1.67 billion, while gross margin expanded 170 basis points (bps) from the year-earlier quarter, reflecting higher selling prices, input cost deflation and cost reduction efforts. Marketing, research and general expenses rose by 17.6% to $881 million primarily due to higher strategic marketing spend.

 

However, increased sales and a higher gross margin more than offset the increase in overheads. Consequently, Kimberly-Clark has recorded a 5.9% growth in operating income to $665 million from $628 million in the year-ago quarter. However, operating margin decreased 20 basis points.

 

At quarter-end, Kimberly-Clark had cash and cash equivalents of $669 million and long-term debt of $4.39 billion, compared with $798 million of cash and $4.79 billion of long-term debt in the year-ago quarter. At the end of the quarter, total debt was $6.4 billion, down from $6.5 billion at the end of the previous quarter.

 

During the first quarter, the company generated $464 million of cash from operations, down from $692 million in the previous quarter, based on an adjustment in working capital. During the quarter, Kimberly-Clark repurchased 2.5 million shares for $150 million.

 

Management has revised its sales increase guidance from 5%−6% to 4%−6% in 2010. Adjusted earnings for the full year are expected in the range of $4.80 to $5.00 per share. The company also stated that it expects to utilize $1.0 billion to $1.1 billion towards capital expenditures and $500 million to $600 million towards share repurchases in 2010.