Kimberly-Clark (KMB) stock jumped in value early Thursday following an upgrade from Bank of America.
The bank’s financial analysts changed their recommendation for KMB stock from a status that suggests the stock may perform worse than the market average to a status that suggests the stock may perform better than the market average. They also raised their price target for the stock to $160, from $115.
“Following a positive change in the quantity of products sold by KMB in the first quarter, following two years of declining sales volumes, we expect a period of sustained improvement that aligns with the strategies the company outlined at its Investor Day in March 2024,” analysts said.
Bank of America now has a more optimistic view of the future of the consumer goods and personal care company. The company is working to make its overall profit margin less dependent on the costs of raw materials such as cellulose and energy, which should lead to a more regular increase in profit margin.
Furthermore, it is expected that the company will be able to gain a larger market share, especially in the high-end product category, “and take market share away from competing brands in the more common product category”, the analysts continue. Bank of America also believes that KMB will continue to create new products to grow sales at or above the overall market rate in key areas and will achieve a similar valuation to its competitors.
Bank of America recalled that its previous decision to lower its recommendation for Kimberly-Clark to a status that suggested the stock could perform worse than the market average in December 2023 was due to the belief that the overall profit margin The company’s highest profit margin of 35.8% was achieved in the third quarter of 2023. However, the company’s overall profit margin improved faster than expected, reaching 37.1% in the first quarter of 2024. .
Kimberly-Clark now aims to achieve an overall profit margin of “at least” 40% by 2030 through cost-cutting measures, further reductions in general and administrative expenses and more efficient operations in its supply chain.
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