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Higher Prices At Kimberly Clark Are Behind JPMorgan's Higher Rating

Higher Prices At Kimberly Clark Are Behind JPMorgan's Higher Rating
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Kimberly-Clark And Its Real Value (Seeking Alpha)

Kimberly Clark Corp (NYSE: KMB)'s announcement that it's raising prices on a host of key items in North America triggered a sell-side upgrade Thursday. 

The Analyst 

JPMorgan analyst Andrea Teixeira upgraded Kimberly Clark from Underweight to Neutral and raised the price target from $90 to $114.

The Thesis

Teixeira estimates that Kimberly Clark’s price increases will apply to roughly 50 percent of its North American personal care business and 85 percent of consumer tissue and take effect in the fourth quarter. (See the analyst's track record here.)

“While it remains to be seen if these price increases will actually hold given the intensely competitive U.S. market, we believe that investors will give KMB shares the benefit of the doubt and that the recent 3x multiple turn rerating that its shares have experienced since early June will likely hold, with the perception that they are turning the corner from the worst,” the analyst said. 

Kimberly Clark said it will raise prices by the mid-single digits to high-single digits on average on Cottonelle, Scott 1000, Kleenex, Viva, Huggies, Pull-Ups and GoodNites.

Competitor Procter & Gamble Co (NYSE: PG)'s recent commentary that it plans to raise prices on some of its premium paper products is supportive of Kimberly Clark’s ability to pass on higher prices, said Teixeira.

“While we believe that KMB may have a bumpy trajectory ahead of it in terms of fully passing list price increases to consumers in [North America], slowing demand in developing markets, FX headwinds and continued pressures from input cost inflation, we think that the recent stock rerating will continue until investors get more visibility on price acceptance in the first half of 2019."

Price Action

Kimberly Clark shares were up 1.48 percent at $118.18 at the time of publication Thursday. 

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Latest Ratings for KMB

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Posted-In: Andrea Teixeira JPMorganAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga


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