Macquarie Turns Bullish On Kimberly Clark: 'We Are More Confident In The Sales Growth Outlook'

Kimberly Clark Corp KMB received an upgrade Tuesday from Macquarie on the basis of a stronger earnings outlook.

The Analyst 

Caroline Levy upgraded Kimberly Clark from Neutral to Outperform and raised the price target from $102 to $142.

The Thesis

Kimberly Clark’s price/mix is coming in stronger than expected, driving margin improvement, Levy said in the upgrade note. (See her track record here.) 

The company’s cost environment is also improving, and efficiency programs are driving savings, the analyst said. 

Kimberly Clark has posted two quarters of 3-percent organic sales growth, and in the first quarter of 2019 the company posted a "significant" EBIT margin beat, Levy said. 

“Price/mix is coming in better than expected YTD, and given much easier sales comparisons for the rest of the year, a solid innovation pipeline and effective marketing/higher adspend (especially on digital), we are more confident in the sales growth outlook for KMB." 

The analyst is projecting 4-percent organic sales growth in 2019, largely driven by price/mix. Emerging markets are also a bright spot for Kimberly Clark, growing 7 percent in the first quarter, an encouraging start to the year, the analyst said. 

Macquarie's new $142 price target represents 13.5x EV/EBITDA, and Levy said she views this valuation as reasonable even when considering the company’s greater exposure to commodity price changes.

Macquarie raised its 2019 EPS estimate from $6.50 to $6.75 and its 2020 estimate from $6.93 to $7.22.

Price Action

Kimberly Clark shares were down 3.43 percent at $125.76 at the time of publication Tuesday. 

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