Kimberly Clark (NYSE:KMB) last week posted what management described as "excellent" third-quarter results that included some of the company's fastest growth in years, paired with a jump in adjusted profitability. Yet investors had a lukewarm response to the report, as it seemed underwhelming compared to the blockbuster numbers put up by rival Procter & Gamble (NYSE:PG) on the same day.

In a conference call with Wall Street analysts, CEO Mike Hsu and his team sought to put those metrics in context with the consumer products giant's wider growth ambitions for 2019 and beyond. Below are a few highlights from that presentation by Kimberly Clark's management. 

A baby having its diaper changed

Image source: Getty Images.

Handling price increases

We delivered 4% organic sales growth. Our pricing initiatives are on track and driving our growth. We also continued to improve product mix, which was up 1 point, for the third consecutive quarter. Encouragingly, the pricing and promotion environment remains broadly constructive. -- Hsu

Management celebrated the fact that organic sales gains slowed only slightly when compared to the prior quarter's three-year high. The good news is that this growth included the passing along of significantly higher prices, plus success around efforts to tilt product sales toward more high-margin brands.

However, not only was Kimberly Clark's growth slower than P&G's, it also included reduced sales volumes while P&G's volumes are on the upswing. Put it all together, and Kimberly Clark's expansion rate is on shakier footing and likely translates into modest market share losses compared to P&G's wins in areas like diapers and cleaning supplies.

Financial wins

I'm pleased with the margin and cash flow improvement we delivered in the quarter. Our teams are working hard on both those fronts. -- Hsu

Kimberly Clark's earnings growth benefited from several positive trends, both inside and outside of management's control. Savings initiatives and price boosts combined with a favorable shift in commodity costs to send gross profit margin up to 35.8% of sales from 33% a year ago, and most of that gain trickled down to the bottom line.

Adjusted operating margin hit 18.5% of sales compared to 17.4% last year. P&G's comparable figure is still a much higher 24%, though, and its gains this quarter meant the performance gap on this key profitability metric actually expanded.

Still, Kimberly Clark did a good job converting most of that profit into cash. The resulting abundance of resources allowed management to invest more heavily in branding support and supply chain improvements. The company is still on track to return as much as $2.2 billion to shareholders in 2019 through a mix of dividends and stock repurchases.

Looking ahead

Our revised organic sales growth target is 3% to 4%, which compares favorably to our prior target of 3%. While we're up 4% year to date, the fourth quarter is our toughest quarterly comp of the year. That said, we expect a solid fourth quarter, which should bring the full year well within the 3% to 4% range. -- Hsu

Kimberly Clark now sees sales growth landing at 4% in 2019, or comfortably above its long-term outlook for annual gains of between 1% and 3%. The broader outlook isn't as bright, though, and management is seeing reasons to expect a slower industry in 2020.

The company's success next year will depend on how well its products can hold their premium pricing through what could be a quick return to a promotional selling environment. For clues to that strength, investors will want to see sales volume begin expanding again even as prices hold steady or inch higher. Shareholders' next window into those dynamics will come when Kimberly Clark issues its official 2020 outlook in January.

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