KimberlyClark(KMB), the consumer staples giant behind household brands like Huggies, Kleenex and Cottonelle, has faced considerable selling pressure as its underlying growth continues to disappoint, while its massive acquisition of Kenvue introduces a new set of financial challenges.
The company has struggled to generate meaningful organic growth for years, with annual sales largely stagnant over the last decade. That lackluster performance has been reflected in the stock price, with KMB shares declining approximately 19% over the last five years, compared with a 66% gain for the S&P 500.
And while management is pursuing a significant transformation of the business, the near-term outlook remains challenging. Weak sales trends, downward earnings revisions and the additional financial burden of its Kenvue acquisition have created an increasingly uncertain fundamental picture.
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KimberlyClark Shares Fall Alongside Earnings Estimates
Even before accounting for the Kenvue transaction, KimberlyClark's underlying business has been showing signs of weakness.
In the second quarter, revenue from continuing operations increased just 0.6% year over year to $4.2 billion, while organic sales were essentially flat.
The company also faced considerable pressure in China, its core growth segment, where social media allegations surrounding its diaper products disrupted sales and contributed to management lowering its full year outlook.
KimberlyClark now expects 2026 organic sales growth to trail its underlying categories by approximately one percentage point, while adjusted earnings per share attributable to the company are expected to decline slightly on a constant-currency basis.
Its October preliminary update reaffirmed that outlook, offering little indication of an imminent acceleration.
Not surprisingly, analysts have been cutting their earnings forecasts, pushing KimberlyClark to a Zacks Rank #5 (Strong Sell).
Over the last 60 days, the Zacks Consensus Estimate for current year earnings has declined 8.1% to $6.83 per share, while next year estimates have fallen 8.2% to $7.03. Earnings estimates have been in steep decline since the start of 2025.
With earnings expectations deteriorating across multiple periods, there is little evidence that the fundamental outlook has reached an inflection point.
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Should Investors Avoid KMB Stock?
KimberlyClark has long been regarded as a defensive consumer staples investment, supported by its recognizable brands, recurring demand and consistent dividend payments.
However, defensive businesses are not necessarily defensive investments, particularly when growth stalls and earnings expectations continue to decline.
The Kenvue acquisition certainly introduces opportunities for improving profitability and expanding the company's market presence. But it also raises the stakes considerably, with a larger debt burden and meaningful execution risks.
Until management demonstrates improving organic growth, successful integration and a stabilization in earnings estimates, KMB appears likely to remain under pressure.
For now, investors may be better served looking elsewhere in the consumer staples sector.
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This article originally published on Zacks Investment Research (zacks.com).
