Kimberly-Clark (KMB 0.87%) posted fourth-quarter results on Tuesday that met executives' low sales growth expectations while modestly outperforming on the bottom line. The owner of Kleenex and Huggies consumer brands also paired a weak forecast for the 2017 fiscal year with a solid boost to its quarterly dividend.

Here's how the big-picture results stacked up against the prior-year period.


Q4 2016 Actuals

Q4 2015 Actuals

Growth (YOY)


$4.5 billion

$4.5 billion


Net income

$505 million

$333 billion






Data source: Kimberly-Clark financial filings.

Weak sales, steady profits

Organic sales growth clocked in at 1%, which was a slight improvement over the prior quarter's flat result. The gains were split evenly between developing and emerging markets and were driven by modest volume growth.

The revenue figure met management's forecast, but only after the team had lowered its outlook in the prior two successive quarters. Kimberly-Clark began the year targeting 5% organic growth to match 2015's result but finished with just a 2% increase. Rival Procter & Gamble (PG 0.63%) outpaced Kimberly-Clark for the second straight quarter by announcing a 2% gain last week.

Image source: Kimberly-Clark.

Kimberly-Clark's bottom line benefited from aggressive cost-cutting that pushed gross profit up 3% to $1.7 billion despite the flat revenue figure. The company also reduced overall expenses by 4% so that adjusted earnings rose by a healthy 5%. The 50% spike in reported profit came from an unusually low earnings result in a prior-year period that included major restructuring charges.

Management's focus

Executives were pleased that Kimberly-Clark could defend its brands despite a weakening consumer products industry and increased pricing pressure from rivals. "While we experienced a challenging economic and competitive environment," CEO Thomas Falk said in a press release, "our market share positions remained broadly healthy."

"We also achieved record cost savings, which helped us improve our margins and deliver earnings in line with our guidance for the year," Falk continued. "We generated strong cash flow and returned $2.1 billion to shareholders through dividends and share repurchases."

Looking ahead

Management isn't optimistic about the coming year. Whereas Procter & Gamble raised its sales outlook to 2.5% (which would be its highest result on that metric in three years), Kimberly-Clark sees little chance of quickly bouncing back toward 2015's 5% growth pace.

Instead, the company forecast another year of weak gains. Executives see organic growth averaging 2% in 2017. "We will execute our global business plan strategies in what we expect will be a continued difficult environment," Falk explained.

The business plan might not deliver market-beating sales growth, but investors can still expect to see plenty of improvements on finances as costs trend lower and as Kimberly-Clark wrings more efficiency out of its global infrastructure. After all, operating cash flow jumped 40% over the last 12 months to over $3 billion. More success there should help protect earnings growth while providing funds for steady cash returns to shareholders. The past year's $2.1 billion of capital return spending matched 2015's result despite a 2% drop in reported revenue.

Kimberly-Clark expects to direct roughly $1 billion toward capital improvements this year while spending the same amount on stock repurchases. Its dividend payment will rise by 5.4%, giving it a rare win against P&G, which most recently disappointed income investors with just a 1% boost to its quarterly payout.