Kimberly-Clark shares rose on Thursday after the Huggies parent reported better-than-feared third-quarter results, showcasing the defensive characteristics that attracted us to the stock in the first place. Revenue in the third quarter dipped 0.4% year over year to $4.13 billion, in-line with the LSEG consensus of $4.13 billion. Adjusted earnings per share (EPS) fell 7% from a year ago to $1.70, exceeding analyst expectations of $1.66, according to LSEG data. KMB YTD mountain Kimberly-Clark YTD Shares of Kimberly Clark were up about 1.5% on Thursday as investors gravitated toward defensive stocks and dumped AI data center names. We started a position in the parent company of Cottonelle, Huggies, and Kleenex brands in early September to shift some of our portfolio’s exposure away from the AI buildout. Though things got off to a rocky start, the stock has been a ballast since early October, when the tech-heavy Nasdaq topped out. With a 5% sell-off Thursday, the Nasdaq sank into correction territory, meaning it’s down over 10% from a recent high. Bottom line We’re reiterating our buy-equivalent 1 rating on Kimberly-Clark and price target of $120 per share. The sell-off in artificial intelligence winners underscores the need to own defensive stocks like Kimberly-Clark. And on the fundamental side, the company earlier this week completed its acquisition of Tylenol and Band-Aid owner Kenvue, giving the company direct exposure to the consumer-health category. We’re also hopeful that some of the headwinds facing Kimberly-Clark’s legacy business — specifically in China, where now-debunked social-media claims crushed baby diapers sales — have peaked. The Kenvue deal is an exciting part of the Kimberly-Clark story. We think this merger will help drive shares higher in the coming quarters and beyond, as Kimberly-Clark’s increased scale enables cost cuts, and the combined company finds ways to boost sales of each others’ products. For example, Jim Cramer believes Kenvue — which was spun out of Johnson & Johnson in 2023 — had an inadequate e-commerce and warehouse strategy, which Kimberly-Clark can rectify. There are geographic differences between the companies. On Thursday’s earnings call, CEO Michael Hsu explained that Europe and India are two markets where Kenvue has a stronger presence and distribution network than Kimberly-Clark. “The flip of it is the same,” he said. “Within Kenvue, they’ve got a relatively smaller business in markets like Mexico and Korea, where we are over $1 billion in both those businesses just on the K-C side. .. We feel like there’s some pretty good opportunity.” In the here and now, Hsu said he’s pleased with Kenvue’s business momentum so far this year, including a mid-to-low single-digit increase for Tylenol in the wake of last year’s controversy, and a 30% year-to-date increase for sales of Rogaine hair-loss medication. He suggested that could be driven by adoption of GLP-1s, which carry hair loss as a potential side…
Read More: Here’s where we stand on Kimberly-Clark shares after a better-than-feared