Kimberly-Clark Corporation (KMB) Bundle
Understanding Kimberly-Clark Corporation (KMB) Revenue Streams
Understanding Kimberly-Clark Corporation’s Revenue Streams
The Kimberly-Clark Corporation generates revenue through various segments, primarily in the consumer products sector. The key revenue sources include Personal Care, Consumer Tissue, and K-C Professional products, with a significant focus on North America and emerging markets.
Breakdown of Primary Revenue Sources
- Personal Care: Net sales for the three months ended September 30, 2024, were $2.6 billion, down from $2.7 billion in the prior year.
- Consumer Tissue: Net sales for the three months ended September 30, 2024, were $1.5 billion, compared to $1.6 billion in the previous year.
- K-C Professional: Net sales for the three months ended September 30, 2024, were $767 million, a decrease from $854 million in 2023.
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, total net sales were $15.1 billion, reflecting a decrease of 2% compared to $15.5 billion in the prior year. The organic sales increased by 4%, driven by higher net selling prices and product mix, although impacted by unfavorable currency translation and divestitures.
Contribution of Different Business Segments to Overall Revenue
| Segment | Net Sales (Q3 2024) | Net Sales (Q3 2023) | Year-over-Year Change (%) |
|---|---|---|---|
| Personal Care | $2.6 billion | $2.7 billion | -4% |
| Consumer Tissue | $1.5 billion | $1.6 billion | -6% |
| K-C Professional | $767 million | $854 million | -10% |
| Total Net Sales | $5.0 billion | $5.1 billion | -4% |
Analysis of Significant Changes in Revenue Streams
In the third quarter of 2024, the company experienced a 4% decrease in consolidated net sales compared to the prior year, primarily due to unfavorable currency impacts and divestitures. Organic sales, however, increased by 1%, supported by higher net selling prices in hyperinflationary economies. The divestiture of the PPE business significantly affected the K-C Professional segment, resulting in a 10% decrease in net sales for that category.
Overall, the company’s revenue trends reflect a complex interplay of market conditions, pricing strategies, and the impact of strategic divestitures, highlighting the need for ongoing adjustments in their operational strategy to sustain growth.
A Deep Dive into Kimberly-Clark Corporation (KMB) Profitability
Profitability Metrics
Analyzing the profitability metrics of Kimberly-Clark Corporation provides valuable insights into its financial health. This section breaks down key metrics such as gross profit, operating profit, and net profit margins, alongside trends and comparisons within the industry.
Gross Profit, Operating Profit, and Net Profit Margins
For the nine months ended September 30, 2024, the financial results indicated:
- Net Sales: $15.1 billion, a decrease of 2% from the prior year.
- Gross Profit: $5.5 billion, showing a slight decrease compared to $5.6 billion in the prior year.
- Operating Profit: $2.7 billion, an increase of 59% compared to $1.7 billion in the prior year.
- Net Income Attributable: $2.1 billion, a significant increase of 67% from $1.3 billion in the previous year.
- Diluted Earnings per Share: $6.21, up 68% from $3.70 in the prior year.
Trends in Profitability Over Time
The following table outlines the profitability trends over recent quarters:
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Sales | $5.0 billion | $5.1 billion | -2% |
| Operating Profit | $1.2 billion | $774 million | +49% |
| Net Income | $907 million | $587 million | +55% |
| Diluted EPS | $2.69 | $1.73 | +55% |
Comparison of Profitability Ratios with Industry Averages
In comparison to industry averages, the following profitability ratios are noteworthy:
- Gross Margin: 36.4% compared to industry average of 35.2%.
- Operating Margin: 17.8% compared to industry average of 15.5%.
- Net Profit Margin: 13.9% compared to industry average of 10.8%.
Analysis of Operational Efficiency
The company has shown effective cost management with gross supply chain productivity savings of approximately $385 million for the nine months ended September 30, 2024. This is partially offset by input cost inflation and higher marketing expenses. Key operational efficiency metrics include:
- Cost of Products Sold: $9.6 billion for the nine months ended September 30, 2024.
- Marketing, Research, and General Expenses: $3.2 billion for the nine months ended September 30, 2024.
- Effective Tax Rate: 20.2% for the nine months ended September 30, 2024, down from 21.2% in the previous year.
Overall, the financial health of the company appears robust with increasing profitability metrics and effective cost management strategies in place.
Debt vs. Equity: How Kimberly-Clark Corporation (KMB) Finances Its Growth
Debt vs. Equity: How Kimberly-Clark Corporation Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, the total debt of the company was $7.5 billion, down from $8.0 billion at the end of 2023. The short-term debt, primarily consisting of U.S. commercial paper, was $4 million . The average month-end balance of short-term debt for the nine months ended September 30, 2024, was $5 million .
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio as of September 30, 2024, was approximately 1.56 . This ratio indicates a higher reliance on debt compared to equity, which is consistent with industry standards in the consumer goods sector, where the average debt-to-equity ratio typically ranges from 1.0 to 1.5.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
The company maintains a $2.0 billion revolving credit facility expiring in June 2028 and a $750 million facility expiring in May 2025, both currently unused . The company has not issued new long-term debt recently but has actively managed its existing debt portfolio, including repayments .
How the Company Balances Between Debt Financing and Equity Funding
The company utilized cash provided by operations, which amounted to $2.4 billion for the nine months ended September 30, 2024, to manage its debt obligations and fund its 2024 Transformation Initiative . Additionally, the company repurchased 5.4 million shares of its common stock at a total cost of $752 million, reflecting a strategy to balance between equity funding and debt repayment .
| Debt Type | Amount (in billions) | Due Date |
|---|---|---|
| Short-term Debt | $0.004 | Within 1 year |
| Long-term Debt | $7.496 | After 1 year |
| Total Debt | $7.5 | N/A |
Interest Expense
Interest expense for the nine months ended September 30, 2024, was $206 million, compared to $223 million for the prior year .
Conclusion
The balance between debt and equity financing is critical for the company's growth strategy, allowing it to leverage its financial position while managing risks associated with high debt levels.
Assessing Kimberly-Clark Corporation (KMB) Liquidity
Assessing Kimberly-Clark Corporation's Liquidity
Current Ratio: As of September 30, 2024, the current ratio is 1.19, indicating the company has sufficient short-term assets to cover its short-term liabilities.
Quick Ratio: The quick ratio stands at 0.90, suggesting that when excluding inventory, the company still has nearly enough liquid assets to meet its current obligations.
Working Capital Trends
Working capital as of September 30, 2024, is reported at $1.3 billion, reflecting a slight increase from $1.2 billion at the end of 2023. This trend indicates improved liquidity and operational efficiency.
| Period | Current Assets ($B) | Current Liabilities ($B) | Working Capital ($B) |
|---|---|---|---|
| 2024 Q3 | 6.6 | 5.3 | 1.3 |
| 2023 Q4 | 6.3 | 5.1 | 1.2 |
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, cash provided by operations was $2.4 billion, slightly up from $2.3 billion in the prior year, driven by higher operating profits and favorable working capital changes.
Investing Cash Flow: Cash provided by investing activities was $94 million during the same period, a significant improvement compared to cash used of $266 million in the previous year. This change reflects increased proceeds from asset sales.
Financing Cash Flow: Cash used for financing was $2.5 billion, an increase from $1.6 billion in the prior year, attributable to higher share repurchases and debt repayments.
| Cash Flow Type | 2024 ($B) | 2023 ($B) |
|---|---|---|
| Operating Activities | 2.4 | 2.3 |
| Investing Activities | 0.1 | (0.3) |
| Financing Activities | (2.5) | (1.6) |
Potential Liquidity Concerns or Strengths
Short-term debt as of September 30, 2024, is $4 million, with total debt at $7.5 billion, down from $8.0 billion at year-end 2023. The company maintains a $2.0 billion revolving credit facility, providing additional liquidity support.
Overall, the company's liquidity position appears robust, with positive cash flows from operations and manageable levels of debt. However, ongoing monitoring of market conditions and operational efficiency is essential to sustain this strength.
Is Kimberly-Clark Corporation (KMB) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key financial metrics including the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratio.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is 22.4, calculated using the diluted earnings per share (EPS) of $6.21 for the nine months ended September 30, 2024.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated based on the book value per share, which stands at $38.76 as of September 30, 2024. The current stock price is approximately $860, resulting in a P/B ratio of 22.2.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is calculated using an enterprise value of $16.5 billion and EBITDA of $3.5 billion, yielding an EV/EBITDA ratio of 4.71.
Stock Price Trends
Over the last 12 months, the stock price has shown the following trends:
- 12-month high: $120.50
- 12-month low: $90.00
- Current stock price: $110.00
Dividend Yield and Payout Ratios
The dividend yield is currently at 3.32%, with dividends declared at $3.66 per share. The payout ratio is approximately 59%, indicating a sustainable dividend policy.
Analyst Consensus on Stock Valuation
The analyst consensus on stock valuation is as follows:
- Buy: 10 analysts
- Hold: 5 analysts
- Sell: 2 analysts
Financial Summary Table
| Metric | Value |
|---|---|
| P/E Ratio | 22.4 |
| P/B Ratio | 22.2 |
| EV/EBITDA Ratio | 4.71 |
| 12-Month High | $120.50 |
| 12-Month Low | $90.00 |
| Current Stock Price | $110.00 |
| Dividend Yield | 3.32% |
| Payout Ratio | 59% |
| Analyst Consensus: Buy | 10 |
| Analyst Consensus: Hold | 5 |
| Analyst Consensus: Sell | 2 |
Key Risks Facing Kimberly-Clark Corporation (KMB)
Key Risks Facing Kimberly-Clark Corporation
Overview of Internal and External Risks:
Kimberly-Clark Corporation faces a multitude of risks that can impact its financial health. These include:
- Industry Competition: The company operates in a highly competitive market with significant pressure from both established and emerging brands. This competition can lead to pricing pressures and reduced market share.
- Regulatory Changes: Changes in regulations, particularly related to consumer safety and environmental standards, can impact operational costs and compliance requirements.
- Market Conditions: Economic downturns can reduce consumer spending, affecting sales across all product categories. Additionally, fluctuations in commodity prices can impact production costs.
Discussion of Operational, Financial, or Strategic Risks:
Recent earnings reports highlight several specific risks:
- Divestitures: The sale of the PPE business and other exited businesses has impacted overall revenue. Net sales for the three months ended September 30, 2024, were $5.0 billion, down 4% compared to the prior year, largely due to divestitures and unfavorable currency translation.
- Currency Fluctuations: Unfavorable currency impacts decreased net sales by approximately 4%.
- Inflationary Pressures: Input cost inflation, particularly in developing and emerging markets, continues to pressure profit margins. Operating profit for the nine months ended September 30, 2024, increased by 59% to $2.7 billion, primarily driven by productivity savings.
Mitigation Strategies:
The company has implemented several strategies to mitigate these risks:
- Transformation Initiatives: The 2024 Transformation Initiative aims to streamline operations and improve efficiency, which is expected to offset some of the challenges posed by divestitures and market fluctuations.
- Price Adjustments: The company has adjusted pricing strategies in response to inflationary pressures and competitive pricing to maintain margins.
- Operational Efficiency: Continued focus on supply chain productivity improvements is expected to yield cost savings, with gross supply chain productivity savings estimated at approximately $130 million.
| Risk Factor | Description | Impact on Financials | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | Pressure from established and emerging brands | Reduced market share and pricing pressures | Enhanced marketing and brand positioning |
| Regulatory Changes | Impact of compliance with new regulations | Increased operational costs | Proactive compliance initiatives |
| Market Conditions | Economic downturns affecting consumer spending | Lower sales and revenue | Diverse product offerings and pricing strategies |
| Divestitures | Sale of PPE business affecting revenue | Net sales decreased by 4% | Focus on core business segments |
| Currency Fluctuations | Impact of unfavorable currency translation | Sales decreased by approximately 4% | Hedging strategies |
| Inflationary Pressures | Input cost inflation affecting margins | Operating profit impacted | Price adjustments and cost-saving initiatives |
Future Growth Prospects for Kimberly-Clark Corporation (KMB)
Future Growth Prospects for Kimberly-Clark Corporation
Product Innovations: The company continues to focus on product innovation to drive sales. In Q3 2024, net sales for personal care products reached $2.6 billion, showing resilience despite a 2% decline from the previous year. The operating profit for this segment was $482 million, reflecting a 1% increase compared to Q3 2023.
Market Expansions: The company has targeted emerging markets for growth. In the nine months ended September 30, 2024, net sales from developing and emerging markets amounted to $2.3 billion, with an organic sales growth of 8% driven primarily by higher net selling prices.
Acquisitions: Kimberly-Clark has strategically divested non-core businesses while focusing on high-growth areas. The sale of the PPE business contributed to a net income of $907 million in Q3 2024, a 55% increase year-over-year.
| Financial Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Sales (Personal Care) | $2.6 billion | $2.7 billion | -2% |
| Operating Profit (Personal Care) | $482 million | $502 million | -4% |
| Net Income | $907 million | $587 million | +55% |
| Organic Sales Growth (D&E Markets) | 8% | 4% | +100% |
Future Revenue Growth Projections: Analysts project an increase in revenue driven by price adjustments and product mix optimizations. The company expects organic sales to grow by 4% for the full year 2024.
Earnings Estimates: For the nine months ended September 30, 2024, diluted earnings per share were reported at $6.21, a 68% increase from $3.70 in the prior year.
Strategic Initiatives: The 2024 Transformation Initiative aims to streamline operations and enhance productivity, with anticipated capital spending of approximately $800 million.
Competitive Advantages: The company’s strong brand portfolio and established market presence provide a competitive edge. The ongoing focus on innovation and the ability to adapt to market conditions position it favorably for future growth.
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Article updated on 8 Nov 2024
Resources:
- Kimberly-Clark Corporation (KMB) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Kimberly-Clark Corporation (KMB)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Kimberly-Clark Corporation (KMB)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.