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Kimberly Clark Corporation (KMB - Analyst Report) is set to report third quarter 2013 results on Oct 22. Last quarter, it posted a 1.4% positive surprise. Let’s see how things are shaping up for this announcement.

Factors to Consider this Quarter

The overall muted consumer spending environment owing to slow recovery of the U.S. economy is expected to hurt Kimberly-Clark’s earnings in the third quarter. The consumer staples sector has been generally weak over the past few quarters due to limited spending that emanated from slow job growth, high interest rates and tightened credit availability. The company also remains exposed to unfavorable foreign currency translations as it has a considerable international presence. The persistently sluggish economic conditions in Europe also create an overhang. We believe these macro factors will likely affect Kimberly-Clark’s third quarter results.

The company’s slowing sales growth in the healthcare segment in the past four quarters is also a concern. It has been noticed that more and more consumers are opting for high deductible, consumer directed healthcare plans or alternate therapies before surgery, which in turn impacts the healthcare business. In addition, Kimberly-Clark is increasing the prices of disposable exam gloves after synthetic nitro prices shot up last year. This pricing action might hurt healthcare volumes in the third quarter.

Though Kimberly-Clark has a strong restructuring and cost savings program in place, which helps to improve overall profitability and returns, we do not expect consumer spending pattern to improve in the rest of 2013.

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 ESP, and a Zacks Rank #1, #2 or #3 for this to happen. That is not the case here as shown below.

Positive Zacks ESP: The Most Accurate estimate stands at $1.41 while the Zacks Consensus Estimate is lower at $1.40. That is a difference of +0.71%.

Zacks Rank #4 (Sell): Kimberly Clark holds a Zacks Rank #4 (Sell). 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:

Green Mountain Coffee Roasters Inc. (GMCR - Analyst Report), Earnings ESP of +4.00% and a Zacks Rank #2 (Buy).

Kraft Foods Group Inc (KRFT - Analyst Report), Earnings ESP of +1.47% and a Zacks Rank #3 (Hold).

Lorillard Inc (LO - Analyst Report), Earnings ESP of +1.24% and a Zacks Rank #3 (Hold).

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