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Will Kimberly-Clark (KMB) Miss Earnings Estimates?


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Kimberly Clark Corporation (KMB - Analyst Report) is set to report fourth quarter and full year 2013 results on Jan 24, 2014. In the last quarter, it delivered a positive earnings surprise of 2.86%. Let’s see how things are shaping up for this announcement.

Factors to Consider

Kimberly-Clark’s healthcare segment has been witnessing decelerated sales growth since the last few quarters, thus raising concerns. In the third quarter, the segment delivered positive results for the first time after four quarters of revenue decline. However, the increase was merely 2% year-over-year. The company has thus decided to spin-off its healthcare business that would allow it to optimize its performance in the coming quarters.

The company has also been experiencing macroeconomic headwinds for the past few quarters, which include lower consumer spending patterns stemming from an unfavorable macroeconomic environment and adverse currency rates. The rise in input prices also has a direct impact on the company's profits.

The company is trying hard to combat the input costs headwinds. Its cost saving program; FORCE (Focused on Reducing Costs Everywhere) is helping it to save costs through lean manufacturing and supply chain practices. Consumer spending and disposable income are expected to increase by the end of 2014. However, they will be volatile in the near term and will impact full-year 2013 results.

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 of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Negative Zacks ESP: The Expected Surprise Prediction or ESP for Kimberly-Clark is -0.71% as the Most Accurate Estimate stands at $1.39 per share, while the Zacks Consensus Estimate is higher at $1.40 per share.

Zacks Rank #4 (Sell): Kimberly-Clark’s Zacks Rank #4 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

Other stocks in the consumer staples sector that have both a positive earnings ESP and a favorable Zacks Rank are:

W D Forty Co. (WDFC - Snapshot Report), with Earnings ESP of + 1.49% and a Zacks Rank #2 (Buy).

Newell Rubbermaid Inc (NWL - Analyst Report), with Earnings ESP of +2.17% and a Zacks Rank #3 (Hold).

Energizer Holdings, Inc. (ENR - Analyst Report), with Earnings ESP of +0.46% and a Zacks Rank #3. 

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