Kimberly-Clark (NYSE:KMB) is far from seeing the end of the positive lift it is getting from the pandemic. The consumer staples giant this past week announced another quarter of unusually strong sales growth, improving profits, and robust cash flow.
These metrics didn't seem as impressive when compared to its industry peer, Procter & Gamble (NYSE:PG), which earlier in the month announced its own fourth-quarter results. But Kimberly-Clark's management still sees lots of support for a bullish business outlook.
Executives discussed those factors in a conference call with Wall Street analysts. Below we'll take a closer look at some highlights from that chat.
It was a good fiscal year
According to the company's chief financial officer (CFO) Maria Henry, "We delivered strong top and bottom line growth and exceeded our previous outlook." The Q4 results were slightly better than management predicted back in October, both with respect to sales and earnings. That outperformance allowed organic sales to rise 6% for the full year compared to the 9% that P&G most recently achieved .
Kimberly-Clark has a large commercial segment that dragged the business down as businesses continued to see reduced in-person operations. But there was more good news than bad news on the sales side. Growth was driven by rising volumes, for example, and the company gained market share in key niches like diapers and tissues. "We delivered healthy top line growth across our portfolio, gained market share, and delivered strong financial results," CEO Mike Hsu said.
Kimberly-Clark is telling investors to brace for some weaker results this year, with growth slowing to between 1% and 2% compared to 6% in 2020. Profitability will take a small step backwards, too, thanks to rising supply costs and elevated COVID-19 expenses.
"We expect a more challenging environment [in 2021], especially compared to last year," according to Hsu. "More specifically, we expect some of the net benefit from COVID dynamics, including higher consumer demand, to reverse."
But management says the bigger picture trend is positive. Growth and earnings for the two years that span 2020 and 2021, a period that smooths out some of the disruptive impact from the pandemic, is running just ahead of management's broader annual objectives.
The cash outlook is positive even though management isn't expecting a repeat of last year's performance that included a boost in annual operating cash from $2.7 billion to $3.7 billion. "Cash flow should remain strong and well above 2019's level," CFO Henry affirmed.
Higher taxes will help reduce that metric in 2021, but there will still be plenty of resources to apply toward investing in the business. Major growth initiatives this year include spending on innovation, advertising, and boosting supply and manufacturing capabilities.
Meanwhile, Kimberly-Clark is aiming to deliver more than $2 billion to shareholders this year, which would mark its 10th consecutive year of reaching that milestone. Its new dividend, that was just hiked 6.5%, enjoys one of the longest growth streaks around with 49 consecutive annual raises.
Fiscal 2021 should give executives ample room to make their 50th boost a year from now and usher Kimberly-Clark into the exclusive club of Dividend Kings. Investors will have to balance that positive cash-return outlook against the prospect for continued underperformance when compared to peers like P&G in areas like sales growth and profitability.