Kimberly-Clark's (KMB) integration plans following its acquisition of Kenvue (KVUE) could generate cost synergies above the company's stated target, although the stock may trade sideways until greater clarity on the combined company's financials emerges in February, RBC Capital Markets said in a Wednesday note.
The brokerage said Kenvue's faster-growing, higher-margin categories strengthen the acquisition rationale. Kimberly-Clark has begun integrating ERP systems and combining procurement, distribution and logistics operations. It said the cost savings are expected to precede revenue synergies.
RBC expects Kimberly-Clark to take a cautious approach to its 2027 outlook amid efforts to revive Kenvue's category growth, product resets, tougher comparisons and continued weakness in China's diaper market.
Management said the combined company generates about $4 billion in free cash flow, split roughly equally between the two businesses. The transaction also involves $2.5 billion in integration costs and about $600 million in one-time transaction fees, the report added.
RBC has an outperform rating on the stock, with a $162 price target.
Kimberly-Clark shares were down 2.7% in Wednesday trading.
Price: 107.74, Change: -3.02, Percent Change: -2.73
