Kimberly-Clark (NYSE: KMB), the maker of Kleenex, Kotex, Cottonelle, and Huggies, reported Q2 EPS of $2.20, $0.40 better than the analyst estimate of $1.80. Revenue for the quarter came in at $4.6 billion versus the consensus estimate of $4.51 billion.

Executive Summary

• Second quarter 2020 net sales of $4.6 billion increased slightly compared to the year-ago period, including organic sales growth of 4 percent.
• Diluted net income per share for the second quarter was $1.99 in 2020 and $1.40 in 2019.
• Second quarter adjusted earnings per share were $2.20 in 2020, up 32 percent compared to $1.67 in 2019. Adjusted earnings per share exclude certain items described later in this news release.
• Second quarter cash provided by operations was $1,579 million in 2020 and $609 million in 2019.
• The company is restoring financial guidance for full-year 2020 and restarting its share repurchase program after temporarily suspending both in April due to the uncertainty related to the COVID-19 pandemic.
• Net sales in 2020 are expected to increase 1 to 2 percent year-on-year, including organic sales growth of 4 to 5 percent. Diluted net income per share for 2020 is anticipated to be $6.35 to $6.90. Adjusted earnings per share in 2020 are expected to be $7.40 to $7.60. The company's outlook in January was for organic sales growth of 2 percent and adjusted earnings per share of $7.10 to $7.35.

Chairman and Chief Executive Officer Mike Hsu said, "We continue to focus on protecting the health and safety of our employees and consumers and operating our supply chain with excellence to meet the needs of our consumers and customers during this unprecedented time period. I am extremely proud of how our teams are managing these near-term operating priorities. At the same time, our underlying business momentum is good, our market share positions are healthy overall and we are delivering excellent financial results."

Hsu continued, "We achieved very good organic sales growth and all-time record adjusted earnings and cash flow in the second quarter. We also delivered significant cost savings, helping us achieve strong margin improvements. While the environment remains uncertain, visibility has improved from three months ago and we are restoring forward-looking guidance. We have increased our 2020 outlook for organic sales and earnings compared to our original plan. We are also further increasing our growth investments to position us for future success. We continue to execute well, operate our business with a balanced approach and remain very optimistic about our opportunities to create shareholder value."

GUIDANCE:

Kimberly-Clark sees FY2020 EPS of $7.40-$7.60, versus the consensus of $7.55.

On April 23, 2020 the company withdrew its previous 2020 guidance because of the uncertainty related to the COVID-19 outbreak. Although uncertainty remains meaningful related to the duration and potential impacts of COVID-19 and the overall environment, visibility has improved from three months ago and the company is restoring forward-looking guidance. In addition to assuming no significant impact from potential supply chain disruptions as a result of COVID-19, the company's key planning and guidance assumptions for full-year 2020 are below:

• Net sales increase of 1 to 2 percent.
  • Organic sales increase of 4 to 5 percent.
  • Foreign currency exchange rates unfavorable by 3 percent.
  • Exited businesses in conjunction with the 2018 Global Restructuring Program expected to reduce sales slightly.
• Adjusted operating profit growth of 6 to 9 percent.
  • Cost savings of $510 to $560 million, including $390 to $420 million from the FORCE program and $120 to $140 million from the 2018 Global Restructuring Program.
  • Key cost inputs expected to decline $150 to $250 million.
  • Higher other manufacturing costs, including expenses related to COVID-19.
  • Increased investments in advertising and commercial capabilities.
  • Unfavorable foreign currency translation and transaction effects.
• Interest expense expected to decrease somewhat year-on-year.
• Adjusted effective tax rate of 23 to 24 percent.
• Net income from equity companies expected to be similar to down slightly year-on-year.
• Adjusted earnings per share of $7.40 to $7.60 compared to $6.89 in 2019.
• Capital spending of $1,200 to $1,300 million.
• Share repurchases of $700 to $900 million, subject to market conditions.

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