Kimberly-Clark Corporation (KMB) has reported results for the first quarter 2011. Earnings for the quarter were $1.09 per share, which was lower than the year-ago quarter earnings by 4.38%. It missed the Zacks Consensus Estimate of $1.18 by 7.62%.
Profits benefited from sales growth and $60 million in cost savings.
For fiscal 2011, Kimberly-Clark narrowed its earnings guidance to the range of $4.80 to 5.05 per share compared to $4.90 to $5.05 expected previously. The current Zacks Consensus Estimate for fiscal 2011 is $4.96 per share.
Consolidated Revenue and Margins
During the quarter, net sales grew 4.0% to $5.029 million from $4,835 million in the same period previous year. The increase was boosted by increased sales volume and higher net selling prices.
For fiscal 2011, the company expects net sales to increase by approximately 4 to 6 percent versus previous guidance of an increase of 3 to 4 percent. Organic sales guidance widened to 2 to 4 percent compared to the previous target range of 2 to 3 percent. Volumes are anticipated to grow 1 to 2 percent.
Compared with the year-ago period, gross margin contracted 497 basis points (bps). Adjusted operating profit was $658 million in the first quarter of 2011, down 14 percent from $763 million in 2010. Adjusted operating profit comparisons benefited from sales growth and $60 million in cost savings.
Key costs rose by a total of $195 million, including $80 million in higher fiber costs, $95 million for raw materials primarily polymer resin and other oil-based materials, $10 million in distribution costs and $10 million in energy.
Kimberly-Clark assumes input cost inflation to be in the range of $450 million–$550 million. The increased inflation assumption is primarily due to higher costs for virgin pulp, polymer resin and most other oil-based materials.
Segment Details
In terms of segments, Personal Care grew 2% year over year to $2.2 billion, Consumer Tissue grew 4% to $1.7 billion, K-C Professional dipped 5% to $800 million, while Health Care also posted a decline of 6% to $400 million for the quarter.
Financial and Cost Saving Update
At the end of first quarter 2011, Kimberly-Clark had cash and cash equivalents of $585 million and long-term debt of $5,806 billion. In the first quarter share repurchases and dividend payments totaled more than $1.1 billion. During the first quarter, the company repurchased approximately 13.1 million shares of its common stock at a cost of $850 million.
Capital expenditure for first quarter 2011 came in at $234 million compared to $184 million in 2010.
Kimberly-Clark generated savings of approximately $60 million for first quarter 2011. For fiscal 2011, the company expects savings to increase to $250 to $300 million, from the prior target range of $200 to $250 million.
Kimberly-Clark currently holds a Zacks #3 Rank. On a long-term basis, we maintain a Neutral rating on the stock, which translates into a short term ‘Hold’ rating.
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