Evercore ISI has reduced its 12-month price target on Kimberly-Clark (NASDAQ:KMB) to $115.00 from $120.00 and kept its rating at "In Line," citing a ramp-up in competition within the U.S. diaper segment that could erode the category's profitability.
The broker's note highlights several converging pressures. Retailers are increasingly using diapers as loss leaders to draw shoppers into stores - a tactic that Evercore argues is compressing the profit pool available to manufacturers. Structurally important shifts include the expiration of Kimberly-Clark's exclusivity at Costco and the return of Procter & Gamble to that retailer, which Evercore sees as materially changing the competitive landscape given Costco's outsized role in U.S. diaper sales.
Evercore also points to developments at other major retailers. Walmart rolled out a second China-imported diaper brand in its third quarter despite shipping costs and tariffs. In response to these dynamics, Kimberly-Clark has chosen to cease manufacturing Costco's private-label diapers in the first quarter to avoid transferring technologies that remain successful in China.
The analyst firm notes that the potential shrinkage of the diaper profit pool would disproportionately affect Kimberly-Clark relative to some competitors because U.S. diapers make up roughly 15% of Kimberly-Clark's global sales - compared with less than 5% for Procter & Gamble. Evercore estimates Costco represents 17% of Kimberly-Clark's U.S. diaper sales but only about 6% of the company's total U.S. sales. Based on that footprint, the firm suggests Kimberly-Clark's share at Costco could fall to approximately 30% - a level it likens to Huggies' share at Walmart where Procter & Gamble extracts much of its scale advantage.
Market pricing for Kimberly-Clark sits below the revised target. The stock was trading at $100.64 at the time of the note, down from a 52-week high of $150.45 and off 19% over the prior 12 months. Separately, InvestingPro analysis referenced by market commentary indicates that KMB appears undervalued relative to its Fair Value, even as analysts flag the competitive headwinds described by Evercore.
Adding nuance to the narrative, Kimberly-Clark reported fourth-quarter 2025 results that showed an earnings per share of $1.86, beating analyst expectations of $1.81. Revenue for the quarter was $4.08 billion, just shy of the $4.09 billion forecast. The EPS outperformance - a 2.76% positive surprise - was highlighted as a favorable element of the company's recent results and contributed to a positive market reaction. Evercore's note nevertheless emphasizes that earnings resilience does not eliminate the strategic and competitive questions in the U.S. diaper market.
Investors and market participants will likely weigh the company's demonstrated earnings capacity against the structural retail and competitive shifts Evercore outlines. The interaction between retailer strategies - including loss-leading tactics and private-label sourcing decisions - and manufacturer exposure to specific retail channels is central to how the analyst frames downside risk for Kimberly-Clark's diaper franchise.
Bottom line - Evercore's downgrade of its price target to $115, combined with the maintained "In Line" rating, reflects concern that intensifying competition and altered retailer relationships could compress margins in a category that represents a meaningful slice of Kimberly-Clark's global sales. That concern sits alongside a recent quarter in which EPS modestly outperformed expectations.