Kimberley-Clark (KMB) Fundamentals Worsen

Kimberley-Clark’s (NYSE: KMB) decision to limit investment spending has not found takers at Barclays Capital (NYSE: BCS) as it could hinder growth. This would also limit and worsen the quality of Kimberley-Clark’s top and bottom line compared to its peer group.

In the past, Kimberley-Clark’s slow-growth mix, capital-intensive manufacturing and raw material exposure have affected valuations. According to Barclays’ analyst, Lauren Lieberman, Kimberley’s repeated channeling of earning upside to earning guidance is an attempt to mask the deteriorating fundamentals. There is a possibility that healthy growth options are being overlooked for short-term benefits.

The most of Kimberley-Clark’s recent M&A activities have been focused on the healthcare front and this may be indicative of a subtle shift in strategy. However, reinvestment is a particularly crucial need, given that the advertising has fallen short of the level outlined in Kimberley-Clark’s Global Business Plan. The commercial success will depend on the innovation and the advertisement driven category development.