Kimberly-Clark Dividend Muting Analyst Downgrade (KMB)

Kimberly-Clark Corporation (NYSE: KMB) is being downgraded on valuation and on margin issues by Janney Capital Markets.  The firm cut the rating to ‘Neutral’ from Buy and lowered its fair value price target objective to $74.00 from a prior price of $79.00.  The downgrade called the margin potential as still being sizeable, but it says that it is just less visible now.

Janney’s downgrade reflects a right-sized discount and diminished margin visibility.  The firm noted, “Our belief that the risk/reward is appropriately balanced reflects an above-average geographic footprint, above-average margin upside potential, and participation in essential staple categories. Offsetting these investment advantages are less margin visibility (as the margin opportunity has shifted from certain discrete items to the less cyclical personal care business), diminished mix benefit (as the “gem” personal care segment has lost profitability), and a nearly-average valuation (14.1x P/E vs. peers’ 14.5x).”

The $74.00 price valuation now is a 5% enterprise value against the EBITDA discount to a historical average.

The stock is down only 0.4% at $71.32 and the consensus price target objective from Thomson Reuters is $74.46.  The dividend yield of 3.9% is keeping investors interested more than if the dividend was lower.

JON C. OGG