WRAPUP 3-U.S. household goods makers show resilience in 2nd quarter

Thu Jul 26, 2012 2:24pm EDT

By Jessica Wohl
    July 26 (Reuters) - Makers of consumer products like
toothpaste, toilet paper and even chocolate bars gave positive
outlooks about the rest of the year, easing concerns that
shoppers were pulling back in a weak economy and sending shares
higher.
    Kimberly-Clark Corp and Hershey Co both
reported quarterly profits that beat analysts' expectations and
raised their full-year forecasts. Colgate-Palmolive Co 
posted earnings in line with estimates and held to its earlier
forecast.
    Kimberly-Clark, known for its Kleenex tissues, saw relief in
key commodity expenses, saying this year's pulp costs should be
lower than previously expected.
    Colgate's shares jumped 4.3 percent to $106.68, while
Kimberly-Clark gained 3.1 percent to $85.99. Shares of both rose
in the second quarter while the broader U.S. stock market
declined.
    "These stocks have really been on a tear. Investors are
seeking safety, they're seeking dividend yield, so that's the
good news," said Edward Jones analyst Jack Russo. "But the
challenge is when you report earnings you've got to support the
lofty valuations out there, and I think both of these companies
did that." 
    Shares of Hershey, which also rose in the second quarter,
were up 1.7 percent at $71.52. The company now expects full-year
profit to grow 12 percent to 14 percent, up from a prior
forecast of 10 percent to 12 percent. 
      
 
    EMERGING MARKETS HELP
    Kimberly-Clark forecast 2012 adjusted earnings per share of
$5.05 to $5.20, up from its previous target of $5.00 to $5.15.
 
    Colgate's sales topped Wall Street's average estimates, as
13 percent organic sales growth in emerging markets stood out
against 2.5 percent growth in developed regions. Organic sales
strip out the impact of foreign exchange, acquisitions and
divestitures. 
    "The read-through for the U.S. consumer is still pretty
lukewarm, but thankfully these companies have a global
footprint," Russo said. "The emerging markets really carried the
day, especially at Colgate, and growth was slower, as we
expected, in Europe and the U.S."
    Results at larger European rival Unilever NV 
 were helped by strength in emerging markets, though the
maker of Lipton tea and Dove soap said it is seeing some
commodities costs edge up. 
    But Hershey, whose business is still largely concentrated in
North America, was still able to increase sales by nearly 7
percent, fueled by price increases. 
    Kimberly-Clark, the maker of Huggies diapers, cited strength
in emerging markets like China, where the volume of diapers sold
jumped more than 40 percent as it expands its distribution. 
    But economic growth there has been cooling, and baby formula
maker Mead Johnson Nutrition cut its full-year sales
target because of that. The maker of Enfamil actually cited a
significant improvement in its U.S. business during the second
quarter for beating Wall Street's earnings estimate.
 
     
    BY THE NUMBERS
    Kimberly-Clark's second-quarter profit, excluding
restructuring costs, rose to $1.30 per share and topped the
average estimate of $1.28, according to Thomson Reuters I/B/E/S.
    Sales rose 0.2 percent to $5.27 billion, just shy of
analysts' expectation of $5.28 billion. 
    Colgate earned $1.33 per share, excluding items, matching
expectations. Sales increased 2 percent to $4.27 billion, ahead
of estimates of $4.25 billion.
    Kimberly-Clark, Colgate and Hershey are all increasing their
 advertising spending to entice consumers with new products,
from  Kimberly-Clark's Depend and Poise pads for female
incontinence, to Colgate's Optic White toothpaste to Hershey's
Rolo minis.
    The companies also raised prices.
    At Kimberly-Clark, prices were up more than 2 percent and
the volume of goods sold increased 2 percent. At Colgate,
pricing was up 3.5 percent and volume rose 5 percent. At
Hershey, pricing rose more than 6 percent and volume fell about
1 percent.
    Kimberly-Clark now expects key commodity costs will be
unchanged to down $100 million this year, versus an earlier
expectation that such costs would range from $50 million in
deflation to $50 million in inflation.
    Colgate still expects double-digit growth in earnings per
share this year on a currency-neutral basis, though at current
rates, foreign exchange would cut 2012 earnings per share growth
by about 6 percent to 7 percent, Chief Executive Ian Cook said.