Should you buy Kimberly-Clark shares after disappointing Q2 results?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Jul 23, 2021
  • Kimberly-Clark shares swang to profit on Friday after the company announced disappointing Q2 results.
  • The company reported fiscal Q2 results Friday before markets opened, missing revenue and EPS estimates.
  • Shares plunged in the morning before recovering later to trade above Thursday’s closing price.

Kimberly-Clark Corp (NYSE:KMB) pulled back Friday morning after the company posted disappointing Q2 results. However, the KMB stock price bounced back later to trade above Thursday’s close despite the company issuing a gloom outlook.

The company reported Q2 non-GAAP earnings per share of $1.47, missing the consensus Street expectation by $024. On the other hand, the GAAP EPS of $1.19 missed expectations by $0.52.

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Kimberly-Clark’s revenue grew marginally by 2.4% Y/Y to $4.72 billion, $50 million lower than the average analyst estimate. Organic sales fell 3% from the same period last year, more than the 0.88% decline the Street analysts had forecasted.

The company compounded a disappointing quarterly performance by lowering its full-year 2021 guidance on earnings per share to the $6.65-$6.90 range, down from the prior guidance of $7.30-$7.55.

KMB also expects organic sales to fall by 2% this year, down from a flat change in the previous guidance.

Should you buy or sell KMB shares now?

From a valuation perspective, Kimberly-Clark shares seem potentially undervalued based on the P/E ratio of 20.26. KMB’s forward P/E also looks compelling at 17.14. However, when we look at the company’s earnings growth expectations for this year and the next, the slow growth offers little impetus to investors.

However, KMB shares are up just 1.48% this year and down more than 8% over the last 12 months. The stock continues to exhibit a volatile trend, making it difficult for long-term investors. 

Therefore, although the stock price swang back to profits on Friday, there is no fundamental catalyst to boost the rebound further. In addition, higher inflation will likely push material costs higher, increasing KMB’s cost of production.

Source – TradingView

Technical overview: Kimberly-Clark stock price forecast after Q2 results

Technically, the KMB stock price appears to have bounced back to trade above Thursday’s close, following the early morning plunge. However, the stock price remains in a choppy pattern formation, meaning another pullback could be on the horizon.

Therefore, investors can target pullbacks at approximately $131.95 or lower at $128.14. The resistance levels are $139.46 and $142.96.

Bottom line: the catalyst for selling KMB shares now

Although Kimberly-Clark shares bounced back late on Friday to trade above the previous close, the stock still seems to be under significant bearish pressure after a disappointing quarterly report.

Therefore, the KMB stock price could be headed for another pullback to maintain its current choppy trading pattern.

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