Kimberly-Clark (KMB) reported mixed fourth quarter results and fiscal 2018 guidance this morning. The company also announced new restructuring and raised its dividend 3%.
Fourth quarter earnings rose 8% to $1.57/share, just above estimates, while sales grew 1% to $4.58 billion, just below estimates. Organic sales fell about 1%, as lower net selling prices of 2% were partially offset by improved product mix of 1% and slightly higher volumes. Organic sales were slightly positive in the third quarter.
The company guided for FY18 adjusted EPS up 11-16% to $6.90-7.20 with sales up 1-2% to ~$18.44-18.62 billion. EPS guidance was above Wall Street estimates while sales were below. Organic sales are expected to increase ~1% versus a flat number in 2017, driven by higher volumes.
The 2018 Global Restructuring Program is expected to reduce Kimberly-Clark's structural cost base and enhance the company's flexibility to invest in its brands, growth initiatives and capabilities critical to delivering future growth. The program will make Kimberly-Clark's overhead organization structure and manufacturing supply chain less complex and more efficient. Over time, the program is expected to accelerate the company's return to delivering sales and earnings growth in line with its Global Business Plan objectives and further enhance long-term shareholder value.
The company expects the program will generate annual pre-tax cost savings of $500 to $550 million by the end of 2021. Savings will be driven by workforce reductions, which are anticipated to be in a range of 5,000 to 5,500 (12-13% of current headcount), along with manufacturing supply chain efficiencies.
KMB also raised its dividend 3% to $1.00/share, giving the stock a healthy 3.4% dividend yield.
CEO Thomas Falk: "Although we expect market conditions will remain challenging in the near-term, we plan to deliver better results in 2018 while we begin to implement our new restructuring. We expect organic sales to return to growth while improving our margins and delivering double-digit growth in adjusted earnings per share. In addition, we will increase investments in our brands, our growth initiatives and the capabilities we need for long-term success. We will also continue to allocate capital in shareholder-friendly ways."
The restructuring comes after the maker of Huggies diapers and Kleenex tissues stock has lagged consumer staples peers.
KMB is battling resistance at the confluence of its 50 and 20-day moving averages this session.