If there's ever been a run on toilet paper, it was this past March. As customers loaded up on sanitary staples, supermarkets began to run out, and Kimberly-Clark (NYSE:KMB), maker of toilet paper, tissues, diapers, and lots of other products that were all of a sudden experiencing elevated demand, saw its highest sales in five years.
While demand is already waning, and sales have dropped accordingly, the share price remains up 15% year to date. Let's discuss why, and whether or not Kimberly-Clark is keeping up the momentum.
Keeping clean throughout the pandemic
Kimberly-Clark's share price remained elevated based on consumer confidence in the company, which is the parent of Kleenex tissues, Cottonelle toilet paper, and Huggies diapers, among others. What's more, shares have returned 36% over the past five years, making it a secure long-term investment.
The company's sales increased 8% over the prior year in the first quarter at the beginning of the pandemic, which is higher than its typical low-single-digit increase. This did not continue into the second quarter, when sales were up slightly year over year. While the company is still enjoying tailwinds that propelled consumer tissue sales 12%, it's also dealing with the headwinds of business closures that negatively impacted its K-C professional unit. The company has also been able to move forward in its cost-saving restructuring plan, and adjusted gross profit rose 16% in the second quarter. Kimberly-Clark boosted its fiscal 2020 earnings per share outlook between 7% and 10% to a range of $7.40 to $7.60.