was downgraded to hold from buy at CFRA Research after concerns that a declining U.S. birth rate in 2021 could impact the business.
Kimberly-Clark brands include Huggies diapers, Cottonelle bath tissue and Kotex feminine products.
CFRA lowered its price target to $150 from $156.
Arun Sundaram, equity analyst at CFRA Research, highlighted data from the Brookings Institution, which forecasts a decline in the U.S. of about 300,000 births in 2021.
According to a December 2020 report published by the nonprofit public-policy organization, 34% of women have decided to delay having a baby or have reduced the number of children they plan to have due to COVID-19. A separate survey shows the same trend among European women.
The group also suggests that the pandemic is increasing the amount of stress on families, which will stop them from having additional children. And time spent at home is keeping new prospective couples from meeting.
Employment issues are also having an impact on family planning.
“The extended nature of this crisis also is likely to create large structural changes in the economy; a sizable share of the jobs lost will be permanent,” the report said. “The longer the duration of the income loss that workers expect, the more likely it is that delayed births will never happen.”
Kimberly-Clark is bracing for the affects of these factors on its business.
“We expect a more challenging environment, especially compared to last year,” said Michael Hsu, chief executive of the company, on the company’s earnings call, according to FactSet.
“More specifically, we expect some of the net benefit from COVID dynamics, including higher consumer demand, to reverse. In addition, commodity costs are rising globally, and we’re also reflecting our latest view on economic conditions and birth-rate trends.”
Kimberly-Clark reported better-than-expected fourth-quarter profit and sales this week. The company expects 2021 adjusted earnings per share of $7.75 to $8, surrounding the FactSet consensus of $7.79, and sales growth of 4% to 6%. The FactSet consensus calls for sales of $19.59 billion, which implies 2.4% growth.
“While we believe the initial guidance may provide some basis for investors that Kimberly-Clark can indeed grow on top of an outlier year in 2020, at this stage, we do not think the guide leaves much room for error and there is a lot of investor skepticism, particularly should the pandemic-related tailwinds fade sooner than guided or the commodity cost environment sees further inflation,” wrote JPMorgan analysts.
JPMorgan rates Kimberly-Clark shares neutral with a $144 price target.
Kimberly-Clark’s stock has fallen 4.6% over the past year, while the S&P 500 index
is up nearly 16% in that period.
A previous version of the article misstated the stock rating for Kimberly-Clark from CFRA. It has been corrected.