Is Kimberly-Clark’s Stock a Buy Now?

With shares of Kimberly-Clark Corporation (NYSE:KMB) trading at around $86.26, is KMB an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

dividendsC = Catalyst for the Stock’s Movement

Kimberly-Clark recently reported earnings that were slightly better than expected. Some investors were happy with the results, but others were annoyed by the fact that they weren’t better. For the latter, it’s important to look at the max chart. It’s a steady incline, and that’s not likely to change at any point in the foreseeable future. There will be some bumps in the road, but that’s the case for any successful stock. This is a company/stock that attracts the wise, long-term investor who appreciates slow and steady growth while collecting dividend payments. This is also one of the most underrated blue chip stocks out there. Despite everything it has to offer, it’s not heavily traded.

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As far as earnings go, Q4 net sales were $5.3 billion, which was a 3 percent increase year-over-year. Diluted EPS came in at $0.68 compared to $1.01 for the same quarter last year. FY2012 EPS came in at $4.42 versus $3.99 in 2011. Revenue also improved to $21.06 billion from $20.85 billion in 2011. Kimberly-Clark saw 5 percent organic sales growth, and 1 percent growth in K-C International. Gross margins improved by 230 basis points, and adjusted operating profit margins improved by 90 basis points. Kimberly-Clark also saved $335 million from the FORCE program and restructuring. In addition to that, Q4 saw cash provided by operations increased by 116 percent.

Kimberly-Clark expects to increase the dividend at a high single-digit rate effective April 2013. The company has increased the dividend for 41 consecutive years. Share repurchases for 2013 are expected to be between $1.0 and $1.2 billion.

It looks like a great story so far, but let’s take a look at some important numbers for confirmation…

E = Equity to Debt Ratio Is Normal

The debt-to-equity ratio Kimberly-Clark is on the high side of normal, and the balance sheet is in negative territory. However, costs are being cut and there is strong cash flow. Operating cash flow is close to $2.70 billion.    

Debt-To-Equity

Cash

Long-Term Debt

KMB

1.17

$1.11 Billion

$6.19 Billion

PG

0.50

$6.64 Billion

$33.43 Billion

CL

1.95

$909.00 Million

$5.19 Billion

 

T = Technicals on the Stock Chart Are Strong

Kimberly-Clark has quietly been performing well over the past three years while also rewarding investors with healthy dividend payments. Over a three-year time-frame, Kimberly-Clark has outperformed Procter & Gamble Co. (NYSE:PG) and Colgate-Palmolive Co. (NYSE:CL). Kimberly-Clark also has a higher yield than both competitors.

1 Month

Year-To-Date

1 Year

3 Year

KMB

3.32%

2.17%

24.38%

62.03%

PG

8.59%

8.77%

16.87%

32.90%

CL

5.80%

5.97%

23.45%

47.91%

 

At $86.26, Kimberly-Clark is currently trading above all its averages.         

50-Day SMA

85.42

100-Day SMA

85.03

200-Day SMA

83.21

 

E = Earnings Have Been Steady

Earnings have been steady on an annual basis, but they haven’t grown consistently. That said, if you’re looking for a consistently profitable company, then Kimberly-Clark is a great option. Revenue has increased every year since 2009.

2008

2009

2010

2011

2012

Revenue ($)in billions

19.42

19.12

19.75

20.85

21.06

Diluted EPS ($)

4.03

4.52

4.45

3.99

4.42

 

We already know what happened this quarter. Now let’s take a look at what happened in previous quarters as well.

12/2011

3/2012

6/2012

9/2012

12/2012

Revenue ($)in billions

5.18

5.24

5.27

5.25

5.31

Diluted EPS ($)

1.01

1.18

1.26

1.30

0.68

 

T = Trends Support the Industry

In most economic environments, consumer staples companies are the safest bet. That’s still the case today, but several companies in this space have reported a sideways consumer in the United States. And this doesn’t pertain to discretionary items. Luckily, this trend has been offset by growth in other countries like China and Brazil.

There has also been some commodity cost inflation, but at least in this case, those costs have been offset by cost savings.

Conclusion

Kimberly-Clark has excellent cash flow, solid margins, consistent revenue growth, and high expectations for 2013. Most importantly, this is a very shareholder-friendly company.

Kimberly-Clark is a long-term OUTPERFORM.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.