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KC

KIMBERLY CLARK CORP (KMB)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered volume-led organic growth and beat Street estimates: adjusted EPS $1.82 vs $1.75 consensus, revenue $4.15B vs $4.10B, and EBITDA $869M vs $842M; reported EPS was $1.34 due to higher adjusted tax rate and transformation/tax items .*
  • Gross margin was 36.0% and adjusted gross margin 36.8%, down 170 bps YoY on price investments and tariffs despite strong productivity; adjusted operating profit was flat YoY at $683M .
  • Guidance updated: organic sales growth now “in line” with ~2% category growth; adjusted operating profit growth low-single digit (CC); adjusted EPS low-to-mid single digit (CC); adjusted FCF ≈ $2B .
  • Potential stock reaction catalysts: management emphasized tariff mitigation (gross tariffs down to ~$100M with ~$50M mitigated) and reiterated margin milestones (≥40% gross margin and 18–20% operating margin before decade end); announced Nov. 3 agreement to acquire Kenvue, creating a ~$32B revenue health and wellness leader (post-quarter) .

What Went Well and What Went Wrong

  • What Went Well

    • “Seventh consecutive quarter of volume plus mix-led growth,” with durable share across geographies and tiers .
    • North America organic sales +2.7% on volume +2.6%; IPC organic +2.1% with share gains in Diapers and Pants; NA operating profit held flat despite exits/tariffs .
    • Tariff mitigation improving: gross tariffs reduced by ~$70M to ~$100M; expectation to largely offset with mitigating actions into Q4 and early 2026 .

  • What Went Wrong

    • Adjusted gross margin down 170 bps YoY on price investments and tariffs; reported operating profit -39.5% YoY due to lapping 2024 PPE gain and higher taxes; adjusted OP flat .
    • Adjusted effective tax rate rose to 26.5% (vs 21.5% prior year) driven by OBBBA-related tax impacts and lapping prior-year tax resolutions .
    • YTD cash from operations $1.8B vs $2.4B last year on lower operating profit and working capital timing; capex stepped up to $741M .

Financial Results

Quarterly trend (2025)

MetricQ1 2025Q2 2025Q3 2025
Net Sales ($USD Billions)$4.840 $4.163 $4.150
Diluted EPS (Reported) ($)$1.70 $1.53 $1.34
Adjusted EPS ($)$1.93 $1.92 $1.82
Gross Margin (%)35.8% 35.0% 36.0%
Adjusted Gross Margin (%)36.9% 36.9% 36.8%
Operating Profit ($USD Millions)$769 $592 $621
Adjusted Operating Profit ($USD Millions)$844 $713 $683

YoY comparison (Q3 2025 vs Q3 2024)

MetricQ3 2024Q3 2025
Net Sales ($USD Billions)$4.144 $4.150
Diluted EPS (Reported) ($)$2.69 $1.34
Adjusted EPS ($)$1.83 $1.82
Operating Profit ($USD Millions)$1,026 $621
Adjusted Operating Profit ($USD Millions)$682 $683

Q3 2025 vs S&P Global Consensus

MetricEstimateActualSurprise
Adjusted EPS ($)1.75*1.82*+$0.07 (Beat)*
Revenue ($USD Billions)$4.096*$4.150*+$0.054B (Beat)*
EBITDA ($USD Millions)842*869*+$27M (Beat)*

Values retrieved from S&P Global.*

Segment breakdown (Q3)

SegmentNet Sales ($USD Billions) Q3 2024Net Sales ($USD Billions) Q3 2025Operating Profit ($USD Millions) Q3 2024Operating Profit ($USD Millions) Q3 2025
North America (NA)$2.735 $2.714 $641 $640
International Personal Care (IPC)$1.409 $1.436 $201 $214

KPIs and Operating Drivers

KPIQ1 2025Q2 2025Q3 2025
Organic Sales Growth (%)-1.6% 3.9% 2.5%
Volume Growth (%)-0.2% 5.0% 2.4%
Adjusted Effective Tax Rate (%)21.4% 20.9% 26.5%
YTD Cash from Operations ($USD Billions)—$1.097 $1.805
YTD Capital Spending ($USD Millions)—$401 $741
Total Debt ($USD Billions)—$7.2 $7.3

Guidance Changes

MetricPeriodPrevious Guidance (as of Q2 2025)Current Guidance (Q3 2025)Change
Organic Sales GrowthFY 2025Outpace ~2% category growth Broadly in line with ~2% category growth Lowered
Reported Net Sales FX ImpactFY 2025~100 bps headwind ~100 bps headwind Maintained
Adjusted Operating Profit (CC)FY 2025Low-to-mid single digit growth Low single digit growth Lowered
Operating Profit FX ImpactFY 2025~100 bps headwind ~70 bps headwind Improved
Adjusted EPS (CC)FY 2025Low-to-mid single digit growth Low-to-mid single digit growth; includes ~200 bps ($0.16) benefit from ceased D&A in discontinued ops Maintained with detail
EPS FX Impact (incl. equity income)FY 2025~150 bps headwind ~150 bps headwind Maintained
Adjusted Free Cash FlowFY 2025≈ $2B ≈ $2B Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
Volume/mix-led growthOrganic decline (-1.6%), price investments amid geopolitics; OP down YoY “Highest volume growth in five years,” organic +3.9%, NA volume +5.2% Seventh consecutive quarter of volume+mix growth; held share despite promos Improving momentum
Tariffs and mitigationNot highlightedTariffs pressured margins; FX/currency headwinds Gross tariffs down to ~$100M (from ~$170M), ~$50M mitigated; expect further offsets in Q4/early 2026 Improving mitigation
Promotions & trialPrice pack architecture/value investments Strong activations; innovation-driven trial Promotions shifted to Q4 to drive trial; promo < category; club channel growth impacts mix Tactical shift to Q4
Margin milestones——Target ≥40% gross margin and 18–20% OP by decade-end Reaffirmed targets
Channel/digital mix——Digital channels driving growth; share +7 pts vs brick-and-mortar Mix shifting to digital
Portfolio actionsIFP discontinued operations framing and PPE divestiture impacts Same; raised full-year outlook framework Post-quarter: agreement to acquire Kenvue to form ~$32B revenue platform Transformational M&A

Management Commentary

  • “Q3 marked Kimberly-Clark’s seventh consecutive quarter of volume plus mix-led growth... We held global weighted market share despite an uptick in competitive promotional activity” — Mike Hsu, CEO .
  • “We continue to be targeting to achieve our milestone on gross margin of at least 40% and an operating profit of at least 18% to 20% before the end of the decade” — Nelson Urdaneta, CFO .
  • “On the gross element of tariffs, we are down about $70 million... down to about $100 million gross tariffs. We’re still mitigating around $50 million... expect to largely mitigate them all” — CFO .
  • “We mainly see promotion as a tactic to drive trial for innovation... promo activity in diapers is lower than the category” — Russ Torres, COO .
  • “Digital channels in North America... our share is higher by 7 points on digital versus brick and mortar” — CFO .

Q&A Highlights

  • U.S. diaper competitive dynamics: KMB shifted promotions into Q4 to support innovation trial (Blowout Blocker, HugFit360, Snug & Dry upgrades), gained ~10 bps share in Q3 and ~90 bps YTD; club channel growth a near-term mix headwind .
  • Margin outlook: gross margin expected to expand in Q4 as supply chain investments and tariff mitigation realize; OP margin similar to last year’s Q4 despite stepped-up marketing .
  • Cost/tariff specifics: gross tariffs cut to ~$100M from ~$170M; ~$50M still mitigated; continued actions expected to offset as 2026 approaches .
  • P&L shape post-IFP JV: expect step-up in adjusted EPS from continuing ops post mid-2026 close (income from equity companies +~30% YoY; buybacks), while total KC adjusted EPS growth muted as discontinued ops wind down by 2027 .
  • Data tracking: strength in un/under-tracked channels (club, e-commerce) explains gaps vs scanner data; digital channels are the primary growth driver .

Estimates Context

  • Q3 2025 performance beat consensus across key metrics: adjusted EPS $1.82 vs $1.75, revenue $4.15B vs $4.10B, EBITDA $869M vs $842M. This reflects durable volume growth, productivity savings, and disciplined promotion for innovation despite tariff and pricing headwinds.*
    Values retrieved from S&P Global.*

  • Estimates may need to adjust for: higher adjusted effective tax rate (26.5% vs 21.5% prior year), tariff mitigation runway into Q4, stepped-up Q4 marketing to support trial, and post-quarter M&A (Kenvue) implications for medium-term algorithm .

Key Takeaways for Investors

  • Quality beat: Adjusted EPS, revenue, and EBITDA all exceeded Street, driven by volume-led growth and productivity; headline reported EPS masked by tax/transformation items .*
  • Near-term margin set-up: gross margin expansion expected in Q4 as tariff mitigation and supply chain investments flow through; marketing investment elevated to cement innovation trial .
  • Tariff risk moderating: gross tariffs down to ~$100M with ~$50M mitigated; ongoing actions should largely offset into early 2026 .
  • Share and mix: NA and IPC held/gained share; watch mix headwinds from club channels and trial promotions as premiumization continues via HugFit360/Skin Essentials .
  • Guidance prudence: organic growth now “in line” with categories; adjusted OP growth trimmed to low-single digit (CC); EPS (CC) low-to-mid single digit; FCF ≈ $2B .
  • Strategic trajectory: reiterated ≥40% GM and 18–20% OP margin milestones; post-quarter agreement to acquire Kenvue could reshape category reach and financial profile over the medium term .
  • Trading implications: constructive into Q4 on margin recovery and tariff mitigation; monitor Q4 promo intensity, adjusted tax rate, and any regulatory/process updates tied to Kenvue transaction .