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Up barely 10% from its low in March 2020, at the current price of $128 per share, we believe Kimberly-Clark stock (NYSE: KMB) has strong upside potential. Kimberly-Clark stock has seen its stock rise from $118 to $128 off its March 2020 low, a lot less than the S&P which increased by over 85% from its lows. Further, the stock is roughly at the same level it was at before the pandemic. We believe that KMB stock could rise more than 10% to regain its 2021-high of $143, driven by expectations of steady demand growth, despite weak Q1 2021 results. Our dashboard What Factors Drove 13% Change In Kimberly-Clark Stock Between 2018 And Now? has the underlying numbers behind our thinking.

Kimberly-Clark’s stock’s rise since late 2018 came due to a 3% rise in revenues from $18.5 billion in FY 2018 to $19.1 billion in FY 2020. Net margins rose from 7.6% to 12.3% over this period, driven largely by a drop in pulp prices. Combined with a 2% drop in the outstanding share count, EPS (earnings-per-share) rose 70%, from $4.05 to $6.90 over this period.

However, Kimberly-Clark’s P/E (price-to-earnings) multiple dropped from 28x in 2018 to 20x by 2020 end, and has further dropped to 19x currently. We believe that the company’s P/E ratio has the potential to rise further in the near term on expectations of continuing demand growth and a favorable shareholder return policy, thus driving the stock price higher.

Where Is The Stock Headed?

The global spread of coronavirus saw an immediate surge in demand for personal hygiene and tissue paper products, with quite a few people embarking on a hoarding spree, immediately as the pandemic hit. This saw Q1 2020 revenues (for quarter ending March 2020) coming in at a record $5 billion. In comparison, the company saw weaker earnings in Q1 2021 (ending March 2021), with revenues coming in at $4.74 billion, and EPS dropping to $1.73, from $1.93 for the same period last year, as sales volumes fell.

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However, with Q1 2020 performance being impacted by a consumer frenzy, a better comparison for Q1 2021 would be Q2 2020 (ending June 2020), when we were still only 3-4 months into the pandemic, and the need for personal hygiene was still at its peak. Revenues in Q2 2020 came in at $4.61 billion, with lower expenses driving EPS to $2.00. Comparatively, despite the widespread vaccinations and the steadily dropping urgency behind personal hygiene, revenues in Q2 2021, still beat those in Q2 2020, which is pretty impressive.

Additionally, we believe demand for the company’s products will stay strong, and that revenues stand to benefit in the near-to-medium term. While it could be a while before the stock regains its 52-week high of $160 (attained in August 2020), if the company can do a better job controlling expenses going forward, a rise in investor expectations could drive up the company’s P/E multiple, helping the stock regain its 2021-high of $143, an upside of more than 10% from present levels.

While Kimberly-Clark stock may move higher, it is helpful to know how its peers stack up. Kimberly-Clark Stock Comparison With Peers summarizes how Kimberly-Clark compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

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