Consumer-products company Kimberly-Clark Corporation (NYSE: KMB), whose colleagues include The Procter & Gamble Compay (NYSE: PG) and Energizer Holdings (NYSE: ENR), reported earnings for the fourth quarter, and they weren't great, at least to me. Sales decreased over 3%, and earnings per share were $1.01 on an adjusted basis, which represented a dive of 9%. According to Stocks in the News, that missed estimates by the proverbial penny. Another weak showing was cash from operations, which fell by 1%. Not disastrous, maybe, and certainly understandable, but disappointing, nevertheless.
One thing to keep in mind is that the swings in the value of the dollar affected net sales. Organic growth actually expanded by 5% in the quarter. Kimberly-Clark doesn't expect much to happen in 2009. Management's headline in the release states that adjusted earnings should be between $4 and $4.20 per share next year. This year, earnings were $4.14 per share. Also to keep in mind is that management is watching pension expenses.
There's probably room here for Kimberly-Clark to beat expectations in the coming year, especially if the company's cost-reduction initiatives expand (which they should). It will depend on the consumer's willingness to pay a premium over generic brands. Kimberly-Clark also seems intent on keeping its marketing machine going, which is a good thing. It's very competitive out there on retail shelves, and since advertising rates are down, one might as well take advantage. The stock is trading at an attractive yield for long-term investors at over 4%, but I don't see any reason to jump in with haste. If you're looking for a defensive play, Kimberly-Clark is arguably a candidate, but it is suffering along with everyone else, and it could return to the 52-week low before heading back up again.
Disclosure: I don't own any company mentioned; positions can change without notice.
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