Investors are about to gain clarity into Kimberly-Clark's (KMB +0.89%) growth potential over the next year or so. The consumer staples giant releases its fourth-quarter earnings results, along with its first official outlook for 2022, before the market opens on Jan. 26.
That announcement is expected to show sales declines for the fiscal year that just closed. Profitability likely fell, too, thanks to soaring costs. But the owner of massive global brands such as Kleenex, Huggies, and Scott is hoping to achieve rebounds in both the top and bottom lines over the next few quarters.
With that big picture in mind, let's look at what investors can expect to hear from the management team in the upcoming report.
Image source: Getty Images.
The sales trends
Most investors who follow Kimberly-Clark are bracing for a flat sales performance with revenue inching higher by about 1% over the year-ago period. The company is going up against one of its biggest quarters, and that year-ago spike will be hard to beat. Revenue should land at about $4.9 billion compared with $4.8 billion last year and $4.6 billion in 2019.
Looking beyond that headline result, watch for signs that the company is still struggling as compared with industry leaders like Procter & Gamble (PG +2.67%). Those signs could show up in organic revenue trends and in the breakdown between price increases and sales volume growth. P&G has achieved a better balance between these goals while Kimberly-Clark has had to rely more on price increases to drive organic sales higher. Assuming those trends continued in Q4, P&G will have improved its market-share position again.
Boosting prices
Soaring costs provide another big reason to follow Kimberly-Clark's price changes this quarter. These expenses reduced net income in Q3 and threaten to harm earnings well into 2022 if the company can't pass along higher prices to consumers.
That challenge becomes harder when organic sales are weak, as they have been in recent months. Kimberly-Clark is predicting that revenue fell between 1% and 2% in fiscal 2021 after the company reduced its outlook back in late October. We'll learn on Jan. 26 whether CEO Mike Hsu and his team have found a way to start closing the profit margin gap with P&G, which has widened in recent quarters.
KMB Operating Margin (TTM) data by YCharts
Looking ahead
There's plenty of investor uncertainty around Kimberly-Clark's 2022 outlook. But this report will add clarity for shareholders. Assuming the company hits its modest 2021 targets, organic revenue will have fallen about 1% this past year after rising 6% during 2020. The profit margin likely took a step backward, too. P&G, in contrast, is showing steady growth in both areas.
Investors are being compensated for some of those weaknesses in the form of a much higher dividend. Kimberly-Clark shares pay a 3.2% annual yield, or roughly a full percentage point higher than P&G's -- and almost 2 percentage points higher than the broader market's yield.
That income is helping support returns, but shareholders aren't likely to see this stock begin outperforming again until the company starts showing better market-share results and improving profitability.
