However, the increase in KMB stock has been far from consistent. Returns for the stock were 10% in 2021, -2% in 2022, and -7% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that KMB underperformed the S&P in 2021 and 2023.
Kimberly-Clark EBITDA Margin: We currently forecast Kimberly-Clark's EBITDA margin to improve from 16.3% in 2023 to about 25% by the end of the Trefis forecast period. There could be a 20% upside to the Trefis price estimate if margins improved to over 30% by the end of our review period.
Kimberly-Clark Corporation is one of the world's leading producers of professional and consumer tissue, baby care non-wovens, female hygiene care, adult incontinence care, and disposable healthcare products. The company sells its products in 175 countries and maintains manufacturing operations in 37 countries. It is one of the top two brands in its respective product segments in over 80 countries.
Products for household use such as consumer tissue, baby diapers, and female hygiene care are sold directly and through wholesalers to supermarkets, mass merchandisers, drug stores, warehouse clubs, as well as variety and department stores. Products for away-from-home use such as professional tissue and medical disposables are sold through distributors as well as sold directly to manufacturing, lodging, office building, food service, healthcare establishments, and high-volume public facilities.
Cellulose fiber, such as kraft pulp or recycled waste paper, is the primary raw material for manufacturing tissue products. Cellulose fiber along with super absorbent material such as Polypropylene is a primary component in disposable diapers, training pants, feminine pads, and incontinence care products. Most recovered paper, synthetics, pulp, and recycled fiber are purchased primarily from third-party suppliers.
Kimberly-Clark's most popular brands include Huggies and Pull-Ups in Baby Care; Scott and Kleenex in Personal-Professional Tissue; Depend and Kotex in Feminine Hygiene Care.
Kimberly-Clark, in early 2024, launched a strategic global transformation initiative. This initiative aims to foster growth and reduce expenses by reorganizing segments, implementing more effective overhead structures, and optimizing the supply chain. This plan will be fully implemented by the end of 2026, with an estimated $1.5 billion in pre-tax charges. Once implemented, this will help the company expand its profit margins.
Kimberly-Clark plans to launch new products gradually to create different product segments under the same brand. This may result in the firm's strategic marketing spending increasing, primarily supporting product innovations, targeted growth initiatives, and overall brand equity. Research and development and selling expenses are also expected to rise to support growth initiatives and to further improve capabilities.
As household disposable incomes have increased, led by higher economic growth in emerging economies, there has been a rapid increase in demand for consumer goods such as baby diapers and female hygiene care. Trefis expects this increasing consumer demand in the relatively unsaturated Asian and Latin American markets, combined with the strong market position of Kimberly-Clark's current brands, will be an important growth driver for the company.
Growth in countries such as China also carries with it some inherent risks. For one, the company's pricing structure will have to be revised significantly to suit the wallets of third-world consumers. The company will also have to step up its general advertising spending to attract new customers. Meanwhile, growth in emerging economies also exposes Kimberly-Clark to currency risks given the volatility relative to the dollar and euro.
