Kimberly-Clark Corporation’s (KMB) deals in essential products like feminine care items, diapers, paper towels, and toilet paper, which people usually buy regardless of economic conditions, making it a defensive stock. In this article, we will delve deeper into the factors that make KMB a reliable and safe investment option for investors.
KMB recently increased its dividend payout by 1.7% from the previous-year quarter to $1.18. The company’s history of raising dividends for 50 consecutive years demonstrates its commitment to returning value to its shareholders.
Its annual dividend of $4.72 per share translates to a 3.48% yield on the current market price, higher than its four-year dividend yield of 3.25%. The company’s dividend payouts have grown at a CAGR of 3.9% over the past three years.
Recently, Ethisphere, a global leader in defining and advancing the standards of ethical business practices, has identified KMB as one of the 2023 World’s Most Ethical Companies. It has received this recognition for five consecutive years, honoring the company’s commitment to business integrity through best-in-class ethics, compliance, and governance practices.
Moreover, Barron’s ranked KMB No. 3 on its 2023 list of the 100 Most Sustainable Companies, which recognizes outstanding environmental, social, and governance (ESG) ratings among the 1,000 largest U.S. publicly traded companies. This marks the fourth consecutive year the company has been included in the list.
Additionally, KMB delivered solid fourth quarter and fiscal year 2022 results and expects its fiscal year 2023 EPS to increase 2%-6% year-over-year. The company also sees capital spending of $800 million-$900 million and share repurchases of $100 million-$150 million this year.
Also, KMB’s revenue increased at a CAGR of 3%, while its levered free cash flow grew at a CAGR of 9.9% over the past three years.
Furthermore, the stock has gained 18.4% over the past six months, closing the last trading session at $135.66. It has gained 7.3% over the past month.
Here’s what could influence KMB’s performance in the upcoming months:
Robust Financials
KMB’s net sales increased 3.8% year-over-year to $20.18 billion for the fiscal year 2022. The company’s gross profit increased 3.9% year-over-year to $6.22 billion. Its operating profit grew 4.7% from the prior year to $2.68 billion.
The company’s net income attributable to KMB increased 6.6% from the prior year to $1.93 billion, while its EPS rose 6.9% year-over-year to $5.72.
Moreover, during the fiscal fourth quarter that ended December 2022, KMB’s gross profit grew 13.3% year-over-year to $1.63 billion. The company’s operating profit increased 36.7% year-over-year to $712 million. In addition, KMB’s adjusted EPS rose 18% year-over-year to $1.54.
Favorable Analyst Estimates
Analysts expect KMB’s revenue to increase 1.8% year-over-year to $20.53 billion in the fiscal year 2023. The company’s EPS is expected to grow 5.2% year-over-year to $5.92 in the current year. Moreover, it has surpassed the consensus EPS and revenue estimates in three of the four trailing quarters, which is impressive.
In addition, the company’s revenue and EPS for the fiscal second quarter ending June 2023 are expected to grow marginally and 3.3% year-over-year to $24.44 billion and $1.38, respectively.
Discounted Valuation
In terms of forward EV/Sales, KMB’s multiple of 2.64 is 3.3% lower than its 2.73 five-year average.
The stock’s forward P/S multiple of 2.21 is 4.4% lower than its five-year average of 2.31. Its trailing-12-month Price/Book of 82.95x is 18% lower than its five-year average of 101.19x.
High Profitability
KMB’s trailing-12-month net income margin of 9.59% is 135.2% higher than the 4.08% industry average. Its trailing-12-month EBIT and EBITDA margin of 13.01% and 16.74% are 62.8% and 52.5% higher than the industry averages of 7.99% and 10.98%.
Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 364.56%, 16.61%, and 10.76% are higher than the industry averages of 10.59%, 6.32%, and 4.17%, respectively. Its 8.24% trailing-12-month levered FCF margin is 210.3% higher than the industry average of 2.65%.
POWR Ratings Show Promise
KMB has an overall rating of B, equating to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. KMB has a B grade for Stability, consistent with its 60-month beta of 0.41.
It has a B grade for Value, in sync with its discounted valuation.
KMB is ranked #17 in the 54-stock Consumer Goods industry.
Click here to access KMB’s Growth, Momentum, Sentiment, and Quality ratings.
Bottom Line
The stock is trading above its 50-day and 200-day moving averages of $128.22 and $129.20, indicating an uptrend.
Additionally, the company enjoys a robust cash flow, enabling it to raise dividends consecutively for five decades.
Considering the company’s strong financial position, impressive growth potential, high profitability, and discounted valuation, investing in this reliable consumer stock could be a wise decision.
How Does Kimberly-Clark Corporation (KMB) Stack Up Against Its Peers?
KMB has an overall POWR Rating of B, equating to a Buy rating. Check out these other stocks within the Consumer Goods industry with an A (Strong Buy) rating: Ennis, Inc. (EBF) and Yue Yuen Industrial (Holdings) Limited (YUEIY)
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KMB shares were unchanged in premarket trading Thursday. Year-to-date, KMB has gained 0.90%, versus a 6.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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