Daniel Acker/Bloomberg
stock stumbled on Thursday, a day after it announced price increases for a number of its products. While that sounds like good news, analysts warn that the consumer goods company could still be stung by higher costs.
Kimberly-Clark (ticker: KMB) announced mid- to high-single digit price increases for the majority of its North American consumer products business. The changes, which will be largely in effect by late June, are “necessary to help offset significant commodity cost inflation,” the company said in its news release. The move follows similar announcements from other consumer products companies, such as
(GIS) and
(SJM). This suggests that higher prices may not be transitory.
On the one hand, Kimberly-Clark is at least able to pass on some of the ballooning input and freight costs to consumers. On the other, analysts aren’t as keen on the stock even following the news.
Deutsche Bank’s Steve Powers reiterated a Hold rating on Kimberly-Clark, while lowering his price target to $145 from $146 on Thursday.
He writes that in a vacuum, the news is positive, and he “generally expect[s] retailer/consumer acceptance.” However, he also says investors should expect “some competitive jockeying from Procter & Gamble (PG) and private labels as price increases are implemented.” In addition, he’s concerned that prices for raw materials and transportation have “mounted at a greater rate than pricing/productivity is likely to be able to offset.”
Likewise, Wells Fargo analyst Chris Carey reiterated an Underweight rating on Kimberly-Clark and $130 price target. He says the impact of commodities for the company this year may have worsened to more than $1 billion, up from prior guidance of $450 million to $600 million in January. “That means Kimberly-Clark needed to move quickly to protect profit,” Carey writes.
That leads him to lower his estimate for full-year earnings to $7.01 a share from $7.60, writing that cost savings can only help offset this pressure so much.
Kimberly-Clark stock fell 1.9% to $136.36 in recent trading. The shares are up 1.1% year to date and 5.4% in the past 12 months.
Write to Teresa Rivas at teresa.rivas@barrons.com
