Kimberly-Clark Q4 Earnings To Bare Impact Of Market Contraction, FX & High Pulp Prices, Analyst Says

RBC Capital Markets analyst Nik Modi reiterated a Sector Perform rating on the shares of Kimberly-Clark Corporation KMB with a price target of $118.
The analyst said that input costs have had a significant impact on KMB in 2022. While resin costs and U.S. gas prices have continued to decline sequentially since Q2’22, EU energy costs have remained elevated throughout the winter, the analyst noted.
Further, pulp prices seem to have moderated, but they have leveled out at a high price, said the analyst.
Since Q3 earnings, the dollar has weakened from its highs, but the analyst still expects FX to remain a material headwind for the fiscal year.
Overall volume declines are high single digit, in line with Q3, but sales are up low-mid single digit, which is greater than Q3 levels. According to the analyst, this suggests relatively inelastic demand and continued pricing power for KMB.
Given an uncertain commodity outlook and potential market contraction, the analyst expects a conservative 2023 guide. Margin recovery will continue to be a focus, along with dialogue around elasticities and private label risk, added the analyst.
Although ’22 provides relatively easy compares, as the year was pressured by input cost inflation, lower volumes, higher spend, and unfavorable FX effect, the analyst believes the macro backdrop, tough pricing comps, and need for reinvestment into the company’s brands will likely limit upside to EPS in ’23.
The analyst also expects mounting trade-down pressure and the promotional environment to intensify.
Price Action: KMB shares are trading lower by 0.28% at $133.86 on the last check Tuesday.

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