Kimberly-Clark Stock: Earnings Beat Leaned on Tax Rate

Kimberly-Clark's third-quarter "beat" came in a quarter when it sold less. In an 8-K filed Thursday, Oct. 15, the maker of Huggies and Kleenex estimated net sales of $4,134 million, down 0.4% from $4,150 million, and organic sales down 1.3%. Adjusted earnings per share from continuing operations still rose 17% to $1.70, helped by an adjusted tax rate of 19.5%, against 26.5% a year earlier and about 23% in the company's full-year plan. The figures are preliminary and unaudited.

Where the 17% Earnings Gain Came From

The filing's reconciliation tables show flat operating profit, with the rest of the gain coming from below that line. Adjusted operating profit slipped to $677 million from $683 million. Adjusted pretax income rose to $632 million from $608 million, and the tax bill fell to $123 million from $161 million.

Measure (adjusted unless noted)	Q3 2026 (estimate)	Q3 2025	Change
Net sales (reported)	$4,134M	$4,150M	Down 0.4%
Organic sales growth	Down 1.3%	Up 2.5%	3.8 points slower
Gross margin (TradeFlock calculation)	35.5%	36.8%	1.3 points lower
Operating profit	$677M	$683M	Down 0.9%
Pretax income	$632M	$608M	Up 3.9%
Effective tax rate	19.5%	26.5%	7.0 points lower
EPS, continuing operations	$1.70	$1.45	Up 17.2%
EPS attributable to Kimberly-Clark	$1.70	$1.82	Down 6.6%

How much did the lower tax rate matter? Two illustrations, using the 8-K's $632 million of adjusted pretax income and 333.7 million diluted shares. At last year's 26.5% rate, the tax bill would have been about $44 million higher, or roughly 13 cents a share. That leaves adjusted EPS from continuing operations near $1.57, still up about 8% from $1.45.

But last year's rate was unusually high. Kimberly-Clark's second-quarter release puts its adjusted rate at 20.9% in the second quarter of 2025 and 20.8% in the first half. A fairer yardstick is the company's own forecast: its Aug. 4 earnings presentation assumed an adjusted effective tax rate of about 23% for 2026. At 23%, tax on $632 million would be about $145 million, or $22 million more than the $123 million estimated. That is about 7 cents a share, or roughly 60% of the 11-cent gap between $1.70 and the $1.59 analysts expected, according to Reuters. Even at 23%, EPS would be about $1.63, still above that figure. Both are TradeFlock illustrations: analysts' tax assumptions are not public, and a full-year plan is not a quarterly forecast.

The second EPS measure, which also counts discontinued operations, fell to $1.70 from $1.82. Cash and cash equivalents were $1,874 million, up from $617 million a year earlier. The 8-K does not tie the cash to a source, but it lists a $4.33-a-share "IFP Transaction Gain," and Kimberly-Clark's second-quarter 10-Q says the IFP transaction closed July 1, 2026 for a cash purchase price of about $1.3 billion, subject to adjustments. The IFP business is now a joint venture, so it no longer sits in discontinued operations. A year earlier the two adjusted EPS measures differed by 37 cents ($1.82 against $1.45); this quarter both are $1.70.

A Low Bar After the September Warning

The beat was measured against expectations that had been cut. CNBC reported that on Sept. 9 Chief Financial Officer Nelson Urdaneta told investors at a Barclays conference that third-quarter sales and EPS were tracking below Wall Street consensus, citing a delayed launch, slower distributor restocking and higher freight costs. The stock fell 4.1% that day.

Against the lowered bar, Reuters, as published by KSL, said sales of $4.13 billion compared with analysts' average estimate of $4.10 billion, and adjusted EPS of $1.70 compared with $1.59. Reuters attributed the results to steady demand and cost savings. The filing's own numbers show organic sales and gross margin down from a year earlier. CNBC said that as of Friday morning, Oct. 16, the shares were up about 8% for the week.

Kenvue Costs Explain the Drop in Reported Profit

Reported operating profit fell to $516 million from $621 million, a $105 million drop. The filing's adjustments include $106 million of "Kenvue Acquisition" costs in the quarter, which it describes as "primarily related to external advisory, legal, accounting, and other related costs." Those costs are excluded from the adjusted figures above.

CNBC said the European Commission approved the deal on the condition that Kimberly-Clark sell some feminine hygiene brands in Europe, and that the company expects it to close before year-end. Two other TradeFlock earnings stories this month also read past the headline: Constellation Brands' beer profit rose just 1%, and Albertsons booked merger-related costs that doubled to $76.9 million over 28 weeks.

What the Unchanged Outlook Implies for Sales

Kimberly-Clark reaffirmed its 2026 outlook. The Oct. 15 press release says organic sales growth should be "approximately 100 basis points below" the weighted average category growth where it competes, a gap it attributes primarily to China social media disruptions. It put trailing 12-month category growth at about 1.7%, which TradeFlock reads as full-year organic growth of roughly 0.7%.

Final third-quarter results and a Q&A session with analysts are set for Thursday, Nov. 5. The tax rate and the sales trend are the two numbers to check in the full statements. Lululemon lowered its outlook last quarter, so holding guidance is not a given.

Photo: Stacked white tissue rolls by Konstantin Volke on Unsplash, used under the Unsplash License.