Kimberly-Clark Gets A Double Upgrade By This Analyst: 'Gross Margins Could Reach 40% By 2030'

Earlier this month, Kimberly-Clark Corp KMB received a rating upgrade from RBC Capital analyst Nik Modi.

The company's volume inflection in the first quarter likely marks the "beginning of a longer-term improvement," according to BofA Securities.

The Kimberly-Clark Analyst: Anna Lizzul upgraded the rating for Kimberly-Clark from Underperform to Buy, while raising the price target from $115 to $160.

The Kimberly-Clark Thesis: The company's volumes inflected in the first quarter after two years of declines, Lizzul said in the upgrade note.

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The initiatives mentioned during the company's Investor Day in March suggests that gross margins could reach "at least" 40% by 2030, the analyst stated. She mentioned changes that could be beneficial for the company:

• The separation of pulp and energy inputs from gross margin could allow greater consistency in margin expansion.
• Kimberly-Clark seems poised for market share gains, following a challenging 2023, "particularly on the premium tier," with China remaining "an area of opportunity for premiumization."
• Continue to innovate to grow at or above market in key categories.

Kimberly-Clark's gross margins recovered and expanded to 37.1% in the first quarter, Lizzul said. The company expects to achieve gross margin expansion ahead "through a combination of reducing gross costs, additional SG&A savings, and scaled supply chain improvements," she further wrote.

KMB Price Action: Shares of Kimberly-Clark had risen by 2.56% to $138.70 at the time of publication on Thursday.

Now Read: Peeling Back The Layers – Exploring Kimberly-Clark Through Analyst Insights