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Kimberly Clark Corporation (KMB - Analyst Report) is set to report fourth quarter and full year 2012 results on January 25. Last quarter it posted a 1.5% positive surprise. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Kimberly Clark’s cost saving initiatives, continued product innovation drove earnings growth in the third quarter.

Kimberly Clark has been hard hit by the ongoing macroeconomic challenges and volatility in cost. However the company is trying hard to combat the difficulty. Its cost saving program; FORCE (Focused on Reducing Costs Everywhere) is helping it to save costs through lean manufacturing and supply chain practices.

Kimberly Clark’s leadership position in consumer product categories coupled with recent launch of many new products in the third quarter like Huggies Little Movers Slip-On diapers, Poise Hourglass Shape pads, Kleenex Cool Touch facial tissue, and improved Cottenelle bathroom tissue, added to revenue growth and market share of the company.

The company will be exiting the diaper category in Western and Central Europe, with the exception of the Italian market and will be divesting or exiting some lower-margin businesses in certain markets, mostly in the consumer tissue segment in order to improve underlying profitability and focus its resources on its strongest market positions and growth opportunities. The company will also streamline its European manufacturing footprint and administrative organization to align its cost structure with these strategic decisions. This will help it to improve margins in the coming quarter.

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 of #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 $1.33 while the Zacks Consensus Estimate is higher at $1.36. That is a difference of -2.21%.

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 #4 and #5 Ranks (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 you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Procter & Gamble Company (PG - Analyst Report), Earnings ESP of +1.80% and Zacks #2 Rank (Buy).

Energizer Holdings Inc. (ENR - Analyst Report), Earnings ESP of +1.39% and Zacks #3 Rank (Hold).

Newell Rubbermaid Inc. (NWL - Analyst Report), Earnings ESP of +2.38% and Zacks #3 Rank (Hold).

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