Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Demand in emerging markets for diapers and other products has helped boost sales for U.S. companies. (DANNY JOHNSTON/AP)
Demand in emerging markets for diapers and other products has helped boost sales for U.S. companies. (DANNY JOHNSTON/AP)

Shoppers snap up diapers, toothpaste and chocolate Add to ...

Makers of consumer products like toothpaste, toilet paper and even chocolate bars gave positive outlooks about the rest of the year, easing concerns that shoppers were pulling back in a weak economy and sending shares higher.

Kimberly-Clark Corp. and Hershey Co. both reported quarterly profits that beat analysts’ expectations and raised their full-year forecasts. Colgate-Palmolive Co. posted earnings in line with estimates and held to its earlier forecast.

More Related to this Story

Kimberly-Clark, known for its Kleenex tissues, saw relief in key commodity expenses, saying this year’s pulp costs should be lower than previously expected.

Colgate’s shares jumped 4.3 per cent to $106.68 (U.S.), while Kimberly-Clark gained 3.1 per cent to $85.99. Shares of both rose in the second quarter while the broader U.S. stock market declined.

“These stocks have really been on a tear. Investors are seeking safety, they’re seeking dividend yield, so that’s the good news,” said Edward Jones analyst Jack Russo. “But the challenge is when you report earnings you’ve got to support the lofty valuations out there, and I think both of these companies did that.”

Shares of Hershey, which also rose in the second quarter, were up 1.7 per cent at $71.52. The company now expects full-year profit to grow 12 per cent to 14 per cent, up from a prior forecast of 10 per cent to 12 per cent.

Kimberly-Clark forecast 2012 adjusted earnings per share of $5.05 to $5.20, up from its previous target of $5.00 to $5.15.

Colgate’s sales topped Wall Street’s average estimates, as 13-per-cent organic sales growth in emerging markets stood out against 2.5-per-cent growth in developed regions. Organic sales strip out the impact of foreign exchange, acquisitions and divestitures.

“The read-through for the U.S. consumer is still pretty lukewarm, but thankfully these companies have a global footprint,” Mr. Russo said. “The emerging markets really carried the day, especially at Colgate, and growth was slower, as we expected, in Europe and the U.S.”

Results at larger European rival Unilever NV were helped by strength in emerging markets, though the maker of Lipton tea and Dove soap said it is seeing some commodities costs edge up.

But Hershey, whose business is still largely concentrated in North America, was still able to increase sales by nearly 7 per cent, fueled by price increases.

Kimberly-Clark, the maker of Huggies diapers, cited strength in emerging markets like China, where the volume of diapers sold jumped more than 40 per cent as it expands its distribution.

But economic growth there has been cooling, and baby formula maker Mead Johnson Nutrition cut its full-year sales target because of that. The maker of Enfamil actually cited a significant improvement in its U.S. business during the second quarter for beating Wall Street’s earnings estimate.

Kimberly-Clark’s second-quarter profit, excluding restructuring costs, rose to $1.30 per share and topped the average estimate of $1.28, according to Thomson Reuters I/B/E/S.

Sales rose 0.2 per cent to $5.27-billion, just shy of analysts’ expectation of $5.28-billion.

Colgate earned $1.33 per share, excluding items, matching expectations. Sales increased 2 per cent to $4.27-billion, ahead of estimates of $4.25-billion.

Kimberly-Clark, Colgate and Hershey are all increasing their advertising spending to entice consumers with new products, from Kimberly-Clark’s Depend and Poise pads for female incontinence, to Colgate’s Optic White toothpaste to Hershey’s Rolo minis.

The companies also raised prices.

At Kimberly-Clark, prices were up more than 2 per cent and the volume of goods sold increased 2 per cent. At Colgate, pricing was up 3.5 per cent and volume rose 5 per cent. At Hershey, pricing rose more than 6 per cent and volume fell about 1 per cent.

Colgate still expects double-digit growth in earnings per share this year on a currency-neutral basis, though at current rates, foreign exchange would cut 2012 earnings per share growth by about 6 per cent to 7 per cent, chief executive Ian Cook said.

Follow us on Twitter: @GlobeInvestor

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories