Path To Near-Term Outperformance Less Clear For Kimberly-Clark, Says Goldman

Goldman Sachs’ Jason English mentioned that the expected catalyst for pulp cost relief for Kimberly Clark Corp (NYSE: KMB) has failed to emerge, while increased competition has led to a downward revision in estimates.

English maintains a Buy rating on the company with a price target of $154, while removing the name from the Americas Conviction List.

Murky Path To Outperformance

Since the stock was added to the Americas Conviction List in mid-December 2015, Kimberly-Clark has remained flat, as compared to the 5 percent rise in the S&P 500.

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“A path to near-term outperformance for KMB has grown murky in the wake of rising competitive intensity around the world and the lack of realized pulp cost relief,” English stated.

However, the analyst believes there could be opportunity for the stock to regain its recent premium, although this would not be required for healthy returns.

Growth Outlook

Kimberly-Clark is expected to be able to achieve above average EPS CAGR in the high single digits in the foreseeable future, while the company’s 3 percent dividend yield offers downside protection as well as a path to double digit TSR.

According to the Goldman Sachs report, the company’s “growth should continue to be fueled by its personal care business as diaper penetration and usage frequency continues to expand in emerging markets – the result is an ongoing evolution to a faster growth and higher return company every year.”

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