Flu Season Brings Happy Tidings For This Company
Consumers around the world proved they still consider “Kleenex” to be synonymous with “tissue.” A grueling flu season in the U.S. and strong sales overseas led Kleenex-maker Kimberly-Clark (NYSE:KMB) to outperform earnings estimates and hit all-time stock highs at the close of a week filled with great news.
Kimberly-Clark’s first-quarter earnings were up 13 percent from last year, driven by a rougher flu season in 2013 and unrelated supply problems for a rival manufacturers. The company said tissue sales increased by more than 10 percentage points compared to last year, while the news on the toilet paper front was equally encouraging. Cottonelle, Kimberly-Clark’s toilet paper brand, sold more than expected while competing brands experienced a shortage due to factory issues. As a result, there was less Quilted Northern on the shelves.
Kimberly-Clark CEO Tom Falk hinted the increase in toilet paper sales (also in the double digits) was due to a disruption in competitor Georgia Pacific’s manufacturing chain. Reuters reported the company had problems upgrading equipment in major plants in Arkansas and Louisiana, opening the door for Kimberly-Clark’s Q1 coup. Falk also announced an increase in projected earnings for the year.
After projecting the company would top out at $5.65 in earnings per share, Kimberly-Clark has raised the bar to $5.75 (with $5.60 at the low end). Analysts had projected on average $5.59 for 2013. Yet the $1.48 earnings per share for the first quarter beat estimates by $0.14, encouraging the company to set its sights higher. Kimberly-Clark also reported major increases in sales of Huggies, its diaper brand, in China and other emerging markets.
Meanwhile, competition from drugstore generic brands did not affect sales of Kimberly-Clark brands, pointing to a stronger consumer position when faced with cheaper alternatives. Kimberly-Clark’s chief executive noted his company could lose a fraction of this market as rival generic brands unveil improved products in the near future.
Regardless, KMB stock hit an all-time high during Friday trading, closing at $106.10 after the good news reached Wall Street. It marked a continuation of encouraging trends for KMB shareholders. Kimberly-Clark’s position appears strong as it exits overseas markets where sales have been affected by the European debt crisis. Of course, nothing worked quite as well as a flu season that forced consumers to reach for Kleenex tissues.
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