Kimberly-Clark is Rallying Following Better-Than-Expected Earnings

One of the world's largest companies, Kimberly Clark (NYSE: KMB  ) , has just released fourth-quarter earnings that left analyst estimates in the dust. These results have caused the stock to spike over 4.5% in the day's trading and could push it much higher. Let's take a look at the report and see if we should join the market and buy or if we should wait for the stock to come down a bit.

The personal products giant
Kimberly Clark is one of the largest personal-products companies in the world. Its brands include Kleenex, Cottonelle, Depend, Huggies, Kotex, Scott, and numerous others, which are said to serve over a billion people each day. Kimberly Clark employs about 57,000 people in 61 countries and its products are currently available in more than 175 countries.

The report
The fourth-quarter report for fiscal 2013 was released before the market opened on Friday. The results beat expectations on both the top and bottom lines and looked like this:

Metric Reported Expected
Earnings Per Share $1.44 $1.39
Revenue $5.31 billion $5.28 billion

Earnings per share increased 5.1% and revenue remained flat year-over-year, as organic sales grew a strong 5%. Operating profit rose 5% to $836 million, driven by the operating margin expanding 90 basis points, as a direct result of cost savings from its FORCE program; FORCE stands for "Focused on Reducing Costs Everywhere" and that is exactly what the program has been doing. Kimberly Clarks CEO, Thomas Falk, summed up the quarter perfectly when he stated,"Our fourth quarter results capped off another year of excellent performance for Kimberly Clark." 

Expectations for 2014
In the report, Kimberly Clark also gave its outlook for fiscal 2014. Here are the company's projections:

Metric Expectations
Earnings Per Share $6.00-$6.20
Net Sales Growth  (1%)-2%
Operating Profit Growth 3%-7%
Dividend Growth 2%-4%
Share Repurchases $1.3 billion-$1.5 billion

These projections call for earnings per share to increase 4%-7.5% from the $5.77 earned in fiscal 2013. Earnings growth is key, but I believe the highlight of this outlook is the immense amount of capital that will be returned to shareholders; the dividend raise will keep the yield above 3% for the year, depending on how high the shares rise, and share repurchases will reduce the float to drive earnings per share higher. As a side note, the dividend increase to come will be the 42nd consecutive year with a raise, continuing the company's impressive streak. Strong earnings paired with great guidance is what makes Kimberly Clark one of the best companies in the market today.

Another giant due out soon
One of Kimberly Clark fellow titans of the personal and household products industry, Clorox (NYSE: CLX  ) , is about to report a quarter of its own. Second-quarter results for fiscal 2014 are due out before the market opens on Feb. 4 and he current expectations call for declines on both the top and bottom lines:

Metric Expected Year Ago
Earnings Per Share $0.91 $0.93
Revenue $1.32 billion $1.325 billion

These estimates call for earnings to decline 2.1% and revenue to fall 0.4% from the same period a year ago. The company's first quarter, in which earnings and revenue rose just 2%, was far from impressive, but I do not believe Clorox will report negative numbers year-over-year; I expect both earnings and revenue to at least be in the range of unchanged to 1% growth. I am especially bullish after seeing Kimberly Clark and Proctor & Gamble exceed earnings expectations, since all three have similar consumer bases. Clorox is arguably the best option in the industry behind Kimberly Clark, so investors could take their pick and do no wrong.

The Foolish bottom line
Kimberly Clark has proven once again that it is one of the best companies in the world. Its earnings exceeded expectations and the company's outlook is pointing toward another strong year in 2014. The stock has spiked higher following the report, so I do not think investors should chase it; however, if it has a steep decline or shows any weakness in the coming weeks, you should strongly consider adding it to your portfolio. 

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