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Kimberly Clark Corporation (KMB - Analyst Report) is set to report second quarter 2013 results on Jul 22. Last quarter it posted a 10.5% positive surprise. Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

Kimberly Clark’s lower commodity costs and continued product innovation is expected to drive earnings in the second quarter. The company is also well positioned overseas and its expanded presence in key emerging markets will generate profits in the quarter. Lower share count owing to share buybacks will help boost earnings in the quarter.

Kimberly Clark’s restructuring and cost savings initiatives have helped reduce costs, thus reflecting higher operating profit. Under the pulp and tissue restructuring program, the company has already exited certain non-strategic products and transferred some production to lower-cost facilities in order to improve overall profitability and returns.

The company is expected to sell one such facility in the second quarter of 2013. Kimberly-Clark anticipates operating profit to increase by at least $75 million in 2013 and at least $100 million in 2014.

Earnings Whispers?

Our proven model does not conclusively show that Kimberly Clark is likely to beat earnings this quarter. That is because a stock needs to have both a positive earnings expected surprise prediction (ESP) (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, #2 or #3 for this to happen. That is not the case here as shown below.

Negative Zacks ESP: The Most Accurate estimate stands at $1.38 while the Zacks Consensus Estimate is higher at $1.39. That is a difference of -0.72%.

Zacks Rank #3 (Hold): Kimberly Clark’s Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies in the consumer staples sector that can be considered as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Kraft Foods Group Inc (KRFT - Analyst Report), Earnings ESP of +5.97% and Zacks Rank #2 (Buy).

The J.M. Smucker Co. (SJM - Analyst Report), Earnings ESP of +2.52% and Zacks Rank #2 (Buy).

Tyson Foods Inc. (TSN - Analyst Report), Earnings ESP of +8.62% and Zacks Rank #2 (Buy).

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