On Wednesday, TD (TSX:TD) Cowen analysts adjusted their outlook on Kimberly Clark shares (NYSE:KMB), downgrading the rating from Buy to Hold and reducing the price target to $145 from the previous $159.
The analysts cited a revised organic growth estimate for 2025, now set at +2.0%, which is below the consensus of +2.3%.
"We maintain conviction in the company's path to gross margin expansion over the medium term but expect less expansion in 2025 as the favorable tailwinds from commodity cost deflation in pulp & paper are beginning to reverse," the analysts said.
The company's organic growth is expected to face challenges, as the previously favorable conditions from lower commodity costs in pulp and paper are starting to shift.
Analysts at TD Cowen mentioned that the reversal of these cost benefits is one of the reasons for the less optimistic outlook. They also pointed out that Kimberly Clark's organic growth is being more significantly affected by external factors compared to its industry peers.
These external factors include natural disasters such as hurricanes, fluctuations in trade inventory levels, and a slowdown in the professional market. According to the analysts, such elements have led to a more volatile organic growth profile for Kimberly Clark, which in turn justifies a lower valuation multiple for the company's stock.
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