KMB earnings analysis
What we found in KMB's 10-Q: the parts that mattered, the offsets in the same document, and what the company said about what comes next.
Our reading of the filing · Free to read, no account needed
Kimberly-Clark delivered modest Q2 sales growth of 0.6% and substantial gross-margin expansion to 38.3%, with adjusted EPS rising 10.4% to $1.80. However, reported EPS fell to $1.04 due to discontinued-operation losses and elevated taxes, while China diaper disruption, higher expected energy-linked costs, and Kenvue-related funding and execution needs temper the earnings improvement. Cash flow improved materially, and continuing-operations debt declined by $700 million versus year-end.
The parts that mattered.
Pulled out of the filing itself, with the figures the company reported.
- Revenue modestly higher, organic sales flat
- Q2 net sales were $4.189 billion, up 0.6% year over year from $4.163 billion and up 0.7% from $4.160 billion in Q1 2026. Organic sales were effectively flat, declining 0.1%.
- Gross margin expanded sharply
- Gross margin expanded 330 basis points year over year to 38.3% on gross profit of $1.603 billion; adjusted gross margin rose 190 basis points to 38.8%, aided by approximately $120 million of productivity savings and one-time tariff refunds.
- Operating profit rises despite transaction costs
- Operating profit increased 6.9% to $633 million, although operating margin was 15.1%, down about 300 basis points sequentially from 18.1% in Q1 2026. Adjusted operating profit rose 6.2% to $757 million.
- Segment profits grew despite uneven sales
- North America operating profit increased 10.7% to $725 million despite a 1.2% sales decline, while IPC revenue grew 4.0% to $1.491 billion and operating profit increased 2.2% to $186 million.
- Cash generation strengthened
- Six-month operating cash flow rose to $1.7 billion from $1.1 billion. After $776 million of capital spending, derived free cash flow was approximately $924 million, versus approximately $699 million in the prior-year period.
- Debt balance declined by $700 million
- Total continuing-operations debt fell to $6.5 billion at June 30, 2026 from $7.2 billion at December 31, 2025. Short-term debt was only $31 million at quarter-end.
And the other side of it.
The offsets in the same document — the things a summary that only listed the good news would have left out.
- China diaper disruption remains a near-term drag
- China diaper social-media allegations reduced total Q2 organic sales by approximately 50 basis points and IPC organic sales by 140 basis points; IPC operating profit absorbed a 440-basis-point impact. Management expects further sales and profit effects in the near term.
- Energy-linked input inflation could pressure margins
- Assuming oil prices remain at current levels, management estimates approximately $150 million of incremental input costs during the remainder of 2026 before mitigation. Q2 adjusted operating profit was also pressured by 2.8% from net price and 3.0% from volume.
- Kenvue acquisition adds financing and execution risk
- The pending Kenvue transaction required $109 million of Q2 acquisition-related costs and contemplates approximately $6.7 billion of cash consideration plus issuance of about 280 million KMB shares. Available bridge financing commitments totaled $3.9 billion after $3.8 billion was terminated.
- Reported EPS declined as tax rate increased
- Reported diluted EPS from continuing operations fell 8.3% year over year to $1.22 from $1.33, and total reported diluted EPS was $1.04 after a $0.18 per-share loss from discontinued operations. The reported effective tax rate rose to 37.9% from 22.6%.
- North America sales faced inventory and fire impacts
- North America Q2 revenue fell 1.2% to $2.698 billion; organic sales declined 0.7%, including a 1.0% effect from retail inventory changes and a 0.8% impact from the Los Angeles distribution-center fire.
- Transformation remains a sizable execution commitment
- The transformation initiative is expected to carry approximately $1.5 billion of pre-tax costs, about 60% cash, through its extension to the end of 2028. Cumulative pre-tax charges were $913 million through June 30, 2026.
What they reported.
What the company itself reported, taken out of the document.
- Earnings per share
- $1.04
- Gross margin
- 38.3%
- Operating margin
- 15.1%
- Segment
- North America: $2.698 billion revenue, down 1.2% year over year
- Segment
- International Personal Care: $1.491 billion revenue, up 4.0% year over year
What they said about what is next.
No numeric revenue or EPS outlook was included in the 10-Q. Management expects approximately $1.3 billion of full-year 2026 capital spending and estimates approximately $150 million of incremental input costs for the remainder of 2026 if oil prices remain at current levels; the previously disclosed outlook was lowered for China disruption effects.
The filing reads about the same as the one before it.
What came before.
- 10-Q · April 28, 2026
- Kimberly‑Clark reported Q1 2026 net sales of $4,163 million, up 2.7% year-over-year, with operating profit rising 19.3% to $753 million and diluted EPS from continuing operations increasing 22.3% to $1.70. Cash provided…
- 10-K · February 12, 2026
- Kimberly‑Clark is executing a strategic pivot (Powering Care) while pursuing two large portfolio transactions: a pending acquisition of Kenvue (stock + cash) and the IFP joint‑venture with Suzano (51% sale for ~ $1.7…
- 10-Q · August 1, 2025
- Kimberly‑Clark reported Q2 net sales of $4,163 million, down $68 million (1.6%) versus prior-year quarter, with gross margin contracting to 35.0% (from 37.7%) but operating profit rising to $592 million (up $53 million)…
- 10-Q · October 22, 2024
- Kimberly‑Clark reported Q3 net sales of $4,952 million, down $180 million versus Q3 2023 ($5,132 million), while diluted EPS rose to $2.69 from $1.73 a year ago. Gross margin expanded slightly to ~36.0% and operating…
This is our reading of a public filing, not the filing. Read the original on SEC.gov · Educational only. Nothing here is investment advice.
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