Household products company Kimberly-Clark (NYSE:)
beat analysts’ expectations in Q1 CY2024, with revenue flat year on year at $5.15 billion. It made a non-GAAP profit of $2.01 per share, improving from its profit of $1.67 per share in the same quarter last year.
Is now the time to buy Kimberly-Clark? Find out by reading the original article on StockStory.
Kimberly-Clark (KMB) Q1 CY2024 Highlights:
- Revenue: $5.15 billion vs analyst estimates of $5.09 billion (1.2% beat)
- EPS (non-GAAP): $2.01 vs analyst estimates of $1.64 (22.5% beat)
- 2024 guidance raised for organic net sales, adjusted operating profit, and adjusted EPS
- Gross Margin (GAAP): 37.1%, up from 33.2% in the same quarter last year
- Free Cash Flow of $244 million, down 75.6% from the previous quarter
- Organic Revenue was up 6% year on year
- Sales Volumes were up 1% year on year
- Market Capitalization: $43.44 billion
Originally founded as a Wisconsin paper mill in 1872, Kimberly-Clark (NYSE:KMB) is now a household products powerhouse known for personal care and tissue products.
Household ProductsHousehold products stocks are generally stable investments, as many of the industry’s products are essential for a comfortable and functional living space. Recently, there’s been a growing emphasis on eco-friendly and sustainable offerings, reflecting the evolving consumer preferences for environmentally conscious options. These trends can be double-edged swords that benefit companies who innovate quickly to take advantage of them and hurt companies that don’t invest enough to meet consumers where they want to be with regards to trends.
Sales GrowthKimberly-Clark is one of the most widely recognized consumer staples companies in the world. Its influence over consumers gives it extremely high negotiating leverage with distributors, enabling it to pick and choose where it sells its products (a luxury many don’t have).
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As you can see below, the company’s annualized revenue growth rate of 2.6% over the last three years was weak as consumers bought less of its products. We’ll explore what this means in the “Volume Growth” section.
This quarter, Kimberly-Clark’s revenue fell 0.9% year on year to $5.15 billion but beat Wall Street’s estimates by 1.2%. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months.
Volume GrowthRevenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.
To analyze whether Kimberly-Clark generated its growth from changes in price or volume, we can compare its volume growth to its organic revenue growth, which excludes non-fundamental impacts on company financials like mergers and currency fluctuations.
Over the last two years, Kimberly-Clark’s average quarterly sales volumes have shrunk by 2.4%. This decrease isn’t ideal as the quantity demanded for consumer staples products is typically stable. Luckily, Kimberly-Clark was able to offset fewer customers purchasing its products by charging higher prices, enabling it to generate 5.6% average organic revenue growth. We hope the company can grow its volumes soon, however, as consistent price increases (on top of inflation) aren’t sustainable over the long term unless the business is really really special.
In Kimberly-Clark’s Q1 2024, year on year sales volumes were flat. This result was a well-appreciated turnaround from the 5% year-on-year decline it posted 12 months ago, showing the company is heading in the right direction.
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Key Takeaways from Kimberly-Clark’s Q1 Results
We were impressed by how significantly Kimberly-Clark blew past analysts’ organic revenue growth expectations this quarter. We were also excited its gross margin outperformed Wall Street’s estimates. Looking forward, full year guidance was raised for major line items such as organic sales, adjusted operating profit, and adjusted EPS. Zooming out, we think this was an impressive quarter that should delight shareholders. The stock is up 2.5% after reporting and currently trades at $132.05 per share.
