(Corrects 8th paragrah to remove reference to profit. Colgate's
profit met, not beat, expectations.)
By Jessica Wohl
July 26 Makers of consumer products like
toothpaste, toilet paper and even chocolate bars said they found
growth in emerging markets and raised U.S. prices, easing
concerns that shoppers were pulling back in a weak economy.
Kimberly-Clark Corp and Colgate-Palmolive Co
on Thursday had somewhat positive outlooks about the rest of the
year, while Hershey Co said price increases helped
quarterly profit and it raised its full-year earnings forecast.
Kimberly-Clark, known for its Kleenex tissues and Huggies
diapers, saw relief in key commodity expenses, saying pulp costs
should be lower than previously expected.
Kimberly-Clark's quarterly profit beat expectations and the
company raised its 2012 forecast, while Colgate's earnings were
in line with estimates and it held to its earlier forecast.
Colgate's shares jumped 3.6 percent to $105.91, while
Kimberly-Clark gained 3.2 percent to $86.04. Shares of both rose
in the second quarter while the broader U.S. stock market
"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
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 estimate, 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
"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.
The results came weeks after Procter & Gamble Co, the
world's largest household products maker, cut its forecast and
still tries to set the right prices in slowing global economies
-- issues its smaller competitors have more nimbly managed. P&G
is set to report quarterly results on Aug. 3.
Hershey, meanwhile, was able to raise prices despite
economic uncertainty. Sales rose 7 percent to $1.41 billion,
mostly on price hikes.
BY THE NUMBERS
Kimberly-Clark's second-quarter profit rose 19.9 percent to
$498 million, or $1.26 per share. Adjusted earnings per share,
excluding restructuring costs, rose to $1.30 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's profit was up less than 1 percent to $627 million,
or $1.30 per share. Excluding items, Colgate earned $1.33 per
share, matching expectations. Sales increased 2 percent to $4.27
billion, ahead of estimates of $4.25 billion.
Both companies are increasing advertising spending to entice
consumers with new products, such as Kimberly-Clark's Depend and
Poise pads for female incontinence, and Colgate's Colgate Optic
Kimberly-Clark and Colgate have also raised prices.
At Kimberly-Clark, the volume of goods sold increased 2
percent, and prices were up more than 2 percent. At Colgate,
volume rose 5 percent, and pricing was up 3.5 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.
Kimberly-Clark now expects to spend $1.3 billion on share
buybacks, subject to market conditions, up from a prior target
of $900 million to $1.1 billion, as it expects to have more
cash, including proceeds from stock option exercises.
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.
(Reporting by Jessica Wohl in Chicago; additional reporting by
David Jones in London and Martinne Geller in New York; editing
by Jeffrey Benkoe)