Kimberly-Clark shares rise as China sales stabilize and Kenvue deal closes

Kimberly-Clark stock climbed roughly 1.5 percent on Thursday. The move came after the company reported third-quarter results that analysts had feared would be worse.

Revenue dipped 0.4 percent year over year to 4.13 billion dollars. That figure matched the consensus estimate from LSEG. Adjusted earnings per share fell 7 percent to 1.70 dollars. The result exceeded the 1.66 dollar average expected by analysts.

The company completed its acquisition of Kenvue earlier this week. Kenvue owns Tylenol and Band-Aid. CEO Michael Hsu said the merger provides opportunities to cut costs and boost sales. He noted that Kenvue has a stronger presence in Europe and India. Kimberly-Clark holds a larger share of markets like Mexico and Korea. Hsu stated that the combined entity has good opportunities in these overlapping regions.

Hsu reported positive momentum for Kenvue products this year. Tylenol sales saw a mid-to-low single-digit increase following last year's controversy. Rogaine hair-loss medication sales rose 30 percent year to date. Hsu suggested that the rise in Rogaine sales may be linked to the side effects of GLP-1 weight-loss drugs.

However, Hsu cautioned that the Kenvue integration is not finished. He identified the skin care and oral care segments as areas needing improvement. These categories include Neutrogena, Aveeno, and Listerine. The company plans to address these issues through better marketing and product resets.

China remains a key factor for Kimberly-Clark's legacy business. Organic net sales in the quarter declined 1.3 percent. A 2.7 percentage point drop was attributed to disruption in China. That disruption began in June when social media claims alleged Huggies diapers contained a toxic chemical called formamide. The Chinese government refuted those claims in October and declared the products safe.

Hsu said demand in China has stabilized and improved slightly since the refutation. He noted that bad news spreads quickly while good news travels slowly. CFO Nelson Urdaneta added that the business will remain subdued in the fourth quarter due to timing. He emphasized that the company is focused on regaining its market share. Huggies held a leading position in China for five years prior to the incident.

Management reaffirmed its full-year 2026 outlook. The company expects organic sales growth of about 0.7 percent. This figure is 100 basis points below the average growth rate of the categories it serves. Adjusted operating profit is expected to rise in the mid-single-digit range on a constant currency basis. Adjusted earnings per share are projected to decline at a low-single-digit rate.

The acquisition of Kenvue will impact earnings in the near term. The company expects 2027 adjusted earnings per share dilution of no more than mid-single digits compared to its standalone performance. This dilution results from the shares issued in the acquisition deal. Management expects double-digit earnings per share growth by 2028 as the benefits of the combined company are realized.