Kimberly-Clark (KMB)

Household products company Kimberly-Clark (NYSE:KMB) met Wall Streets revenue expectations in Q3 CY2025, but sales were flat year on year at $4.15 billion. Its non-GAAP profit of $1.82 per share was 3.9% above analysts’ consensus estimates.

Company Overview

Originally founded as a Wisconsin paper mill in 1872, Kimberly-Clark (NYSE:KMB) is now a household products powerhouse known for personal care and tissue products.

Household products stocks are generally stable investments, as many of the industry's products are essential for a comfortable and functional living space. Recently, there's been a growing emphasis on eco-friendly and sustainable offerings, reflecting the evolving consumer preferences for environmentally conscious options. These trends can be double-edged swords that benefit companies who innovate quickly to take advantage of them and hurt companies that don't invest enough to meet consumers where they want to be with regards to trends.

Competitors that offer a wide range of household and personal care products include Proctor & Gamble (NYSE:PG), Unilever (LSE:ULVR), and Church & Dwight (NYSE:CHD).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

With $16.47 billion in revenue over the past 12 months, Kimberly-Clark is one of the larger consumer staples companies and benefits from a well-known brand that influences purchasing decisions. However, its scale is a double-edged sword because it’s harder to find incremental growth when your existing brands have penetrated most of the market. For Kimberly-Clark to boost its sales, it likely needs to adjust its prices, launch new offerings, or lean into foreign markets.

As you can see below, Kimberly-Clark struggled to generate demand over the last three years. Its sales dropped by 6.5% annually despite consumers buying more of its products. We’ll explore what this means in the "Volume Growth" section.

This quarter, Kimberly-Clark’s $4.15 billion of revenue was flat year on year and in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 2.2% over the next 12 months. While this projection suggests its newer products will fuel better top-line performance, it is still below average for the sector.

When analyzing revenue growth, we care most about organic revenue growth. This metric captures a business’s performance excluding one-time events such as mergers, acquisitions, and divestitures as well as foreign currency fluctuations.

The demand for Kimberly-Clark’s products has generally risen over the last two years but lagged behind the broader sector. On average, the company’s organic sales have grown by 2.6% year on year.

In the latest quarter, Kimberly-Clark’s organic sales rose by 2.5% year on year. This performance was more or less in line with its historical levels.

All else equal, we prefer higher gross margins because they usually indicate that a company sells more differentiated products, has a stronger brand, and commands pricing power.

Kimberly-Clark’s unit economics are higher than the typical consumer staples company, giving it the flexibility to invest in areas such as marketing and talent to reach more consumers. As you can see below, it averaged a decent 33.9% gross margin over the last two years. Said differently, Kimberly-Clark paid its suppliers $66.08 for every $100 in revenue.

In Q3, Kimberly-Clark produced a 36% gross profit margin, up 11.7 percentage points year on year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Kimberly-Clark has been an efficient company over the last two years. It was one of the more profitable businesses in the consumer staples sector, boasting an average operating margin of 15.3%.

Analyzing the trend in its profitability, Kimberly-Clark’s operating margin decreased by 2.9 percentage points over the last year. Even though its historical margin was healthy, shareholders will want to see Kimberly-Clark become more profitable in the future.

This quarter, Kimberly-Clark generated an operating margin profit margin of 15%, down 9.8 percentage points year on year. Conversely, its gross margin actually rose, so we can assume its recent inefficiencies were driven by increased operating expenses like marketing, and administrative overhead.

We track the change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

In Q3, Kimberly-Clark reported adjusted EPS of $1.82, down from $1.83 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 3.9%. Over the next 12 months, Wall Street expects Kimberly-Clark’s full-year EPS of $6.88 to grow 11.6%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Kimberly-Clark has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the consumer staples sector, averaging 13.4% over the last two years.

Taking a step back, we can see that Kimberly-Clark’s margin dropped by 6.3 percentage points over the last year. If its declines continue, it could signal increasing investment needs and capital intensity.

Kimberly-Clark’s free cash flow clocked in at $368 million in Q3, equivalent to a 8.9% margin. The company’s cash profitability regressed as it was 10.4 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Kimberly-Clark hasn’t been the highest-quality company lately because of its poor top-line performance, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 26.6%, splendid for a consumer staples business.

Kimberly-Clark reported $617 million of cash and $7.30 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $3.43 billion of EBITDA over the last 12 months, we view Kimberly-Clark’s 2.0× net-debt-to-EBITDA ratio as safe. We also see its $113 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Kimberly-Clark narrowly top analysts’ organic revenue expectations this quarter. EPS also exceeded expectations. On the other hand, its gross margin fell short of Wall Street’s estimates. Overall, this was a mixed quarter. The stock traded up 3% to $120.30 immediately after reporting.

Updated: December 3, 2025 at 9:51 PM EST

Before deciding whether to buy Kimberly-Clark or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Kimberly-Clark has a few positive attributes, but it doesn’t top our wishlist. Although its revenue has declined over the last three years, its growth over the next 12 months is expected to be higher. And while Kimberly-Clark’s cash profitability fell over the last year, its powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits.

Kimberly-Clark’s P/E ratio based on the next 12 months is 13.8x. This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $127.73 on the company (compared to the current share price of $106.19).