Kimberly-Clark Beats Estimates - Analyst Blog

Kimberly-Clark Corporation has reported results for the fourth quarter and full fiscal 2010. Earnings for the quarter were $1.20 per share which surpassed the Zacks Consensus Estimate of $1.15 by 4.35%.

Earnings also outpaced the year-ago quarter earnings by 2.56%. Profits were primarily driven byorganic sales growth, cost savings and decline in the tax rate.

For the full year 2010, earnings were $4.68 per share which also topped the Zacks Consensus Estimate of $4.64.

For fiscal 2011, Kimberly-Clark expects earnings to be in the range of $4.90 to 5.05 per share. The current Zacks Consensus Estimate for fiscal 2011 is $4.99 per share.

Consolidated Revenue and Margins

During the quarter, net sales grew 1.9% to $5.1 billion, boosted by the acquisition of I-Flow Corp. (a health care company that develops and markets drug delivery systems and products) which was partially offset by unfavorable currency exchange rates.

For fiscal 2010, net sales grew 3.0% to $19.7 billion driven by the combined impact of the I-Flow Corporation and Jackson Safety acquisitions completed in 2009.

For fiscal 2011, the company expects net sales to increase in the rage of 3% to 4%. Organic sales are expected to grow in the 2% to 3% range. Volumes are expected to grow by 1% to 2% and the combination of higher net selling prices and improved product mix is believed to contribute an additional point of growth. Currency translations are expected to increase sales by approximately 1%.

Compared with the year-ago period, gross margin contracted 103 basis points (bps) and operating margin reduced 62 bps in the reported quarter. The margin contracted as benefits from the company's FORCE program was fully offset by significant cost inflation of approximately $220 million. Key costs included $130 million in higher fiber costs, $75 million for raw materials primarily polymer resin and other oil-based materials, $10 million in distribution costs and $5 million in energy.

Kimberly-Clark assumes input cost inflation to be in the range of $200 million–$250 million guidance range.

Segment Details

In terms of segments, Personal Care grew 1.6% year over year to $2. 16 billion, Consumer Tissue grew 3.9% to $1.71 billion, K-C Professional dipped 2.1% to $798 million, while Health Care recorded also posted a decline of 1.3% to $382 million for the quarter.

Financial and Cost Saving Update

At the end of the year, Kimberly-Clark had cash and cash equivalents of $876 million and long-term debt of $4.72 billion, compared with $798 million and $4.79 billion, respectively, at the end of fiscal 2009. Kimberly-Clark repurchased shares worth $800 million during fiscal 2010.

In fiscal 2011, the company expects to purchase shares worth $1.5 billion.

Capital expenditure for fiscal 2011 came in at $964 million and anticipates fiscal 2011 spending to be in the range of $950 million to $1,050 billion.

Kimberly-Clark's ‘Focused on Reducing Costs Everywhere' (FORCE) program generated savings of approximately $370 million for the year 2010.