Kimberly-Clark Down On Shareholder Class Action Lawsuit

Kimberly-Clark Corp. (NYSE:KMB) fell 0.98% yesterday after the company announced that a law firm, Kessler Topaz Meltzer & Check, LLP has filed a shareholder class action lawsuit against the company and Halyard Health, Inc. (NYSE:HYH) , which was spun out of Kimberly-Clark in Oct 2014. The lawsuit has been filed on behalf of investors who purchased Kimberly-Clark stock after Feb 25, 2013 and received Halyard securities in connection with Kimberly-Clark's spin-off and/or acquired Halyard securities between Oct 21, 2014 and Apr 29, 2016.

Per the complaint by investors, Kimberly-Clark and Halyard made false and misleading statements regarding surgical gowns and knowingly provided defective surgical gowns to U.S. workers amid the Ebola crisis. They claimed that Halyard's MICROCOOL surgical gowns were prone to leaks and did not consistently meet the industry safety standards for the treatment of Ebola.

We note that Kimberly-Clark has been facing headwinds of late. Recently, it suspended its operations in Venezuela, without prior notice, and fired around 1000 workers, thus violating the South American country’s laws.

The consumer-products giant reportedly said that it is shutting down its two-decade old Venezuela operations, as it is struggling to obtain raw materials and facing a shortage of hard currency and dealing with soaring inflation. However, it would reconsider its decision if the conditions improve in the country.

Like Kimberly-Clark, several big companies like Bridgestone, General Mills Inc. (NYSE:GIS) , and Procter & Gamble Co. (NYSE:PG) have scaled back operations in Venezuela amid this economic crisis.

Overall, we are impressed with Kimberly-Clark’s cost saving initiatives and continued product innovation that have been driving earnings for the past many quarters. The company also achieved higher organic sales on the back of volume growth and better pricing in the last eight consecutive quarters. This Zacks Rank #3 (Hold) company is scheduled to release its second quarter 2016 results on Jul 25.