The Not So Tempting Anymore Kimberly Clark (NYSE:KMB) Stock


Kimberly Clark (NYSE:KMB) is among those companies that seem too good and too promising to be true. The stocks offer reliable, steady growth in revenues and the shareholders are promised a chunky dividend. Such an investment is considered safe, with a steady income for the non-risky investors. Past few years are an example of this. The share at this point stands at $113 per piece, and the dividend payments are separate. But sometimes things are just too good to be true. A few speculations into Kimberly Clark (NYSE:KMB) reveal why it’s better to wait before purchasing the Kimberly Clark (NYSE:KMB) shares.

–          The few strong brands under its umbrella, like Kleenex and Huggies have contributed significantly in the revenue and earnings per share growth. Also, since Kimberly Clark (NYSE:KMB) enjoys a global status, international sales also played a vital role in its success, especially in emerging markets. With good results in the past, the company has built very high expectations for the future. According to its guidance, which promises 8% growth year over year seems to be too much confidence speaking. There could come a time when expectations will exceed the growth earnings and eventually would result in a sell off.

–          Comparing results of the past two quarters, one can arrive at a conclusion that even though the earnings have been pretty modest, the stock continues to hike. This makes ones hesitant about the stock’s worth. For example, the company has seen strong growth figures in its overseas market, but back home the growth has been slow or somewhat stagnant. The personal care items, which contribute 45% in the revenues, rose only by 3% and there was a 1% decline in the sales in North America. So this scenario confuses the investors in the company’s potential.

–          One of the biggest attraction investors have towards Kimberly Clark (NYSE:KMB) is the 3% dividend yield and the company has paid for 80 years uninterrupted. This has made investors turn to Kimberly Clark (NYSE:KMB) over and over again. But last year figures revealed just a 3% rise has fallen short of expectations. If investors are only around for yield, then they could find better offers elsewhere. For example, Unilever PLC (NYSE:UL) pays 4% and has a much stronger position in the market as compared to Kimberly Clark (NYSE:KMB). Unilever (NSE:UL) at this stage has a potential to become one of the biggest beneficiaries.

It’s no news to anyone that Kimberly Clark (NYSE:KMB) is ranked among the highly profitable companies that have many strong brands under its umbrella. The business is spread out globally, in several geographical regions and has a whole variety of product categories to offer. Shareholders to date are happy with their returns. But, how long will these returns continue as the company moves forward. Expectations are being se,t but according to many analysts, they seem unrealistic even for Kimberly Clark (NYSE:KMB). Hence, it is advised that investors wait for a 10 to 15 % pullback, before heading in for the purchase.