Analyst Fights The Temptation To Sell Kimberly-Clark

Citi analyst Wendy Nicholson sees a difficult road ahead for Kimberly Clark Corp (NYSE:KMB). While she was tempted to give the company a Sell rating, she ended up staying Neutral with a $134 price target.

“It feels to us as if KMB is in a tough spot," Nicholson said in a note. "[T]he competitive environment has intensified, category growth feels sluggish, reinvestment needs are likely going up, commodity pressures will likely increase over the next 12 months, and we expect the company to go thru a CEO transition in the not-too-distant future."

An Expensive Valuation

Kimberly Clark, which is up 11 percent year to date, is trading at 9 percent premium in the market according to Nicholson.

“While this expanding relative multiple over time has been warranted given the changing mix of KMB’s business, we consider KMB’s current valuation to be rich, especially in light of what could be risk to our EPS forecasts, or if not, the chance that KMB is able to meet our EPS forecasts in a lower-quality way,” she said.

Is Kimberly Clark A Potential Acquisition Target?

While Nicholson noted she believes Kimberly Clark will remain an independent company, she does expect takeover speculation to take place. This helps eliminate some of the downside for Kimberly Clark.

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