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Will Clorox (CLX) Beat Q2 Earnings on Sound Fundamentals?

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The Clorox Company (CLX - Free Report) will release fourth-quarter fiscal 2014 financial results on Aug 1, before the market opens. Last quarter, this consumer products company posted an earnings surprise of approximately 9.26%. Let's see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Clorox is likely to beat earnings because it has the right combination of key factors.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.49%. This is a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: Clorox carries a Zacks Rank #3 (Hold). The stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Clorox’s Zacks Rank #3 and +1.49% ESP makes us confident of earnings beat this release.

What is Driving Better-than-Expected Earnings?

Although, Clorox concluded its last reported quarter on a strong note, it projected a bleak fiscal 2014 and 2015 due to pressure from unfavorable foreign currency exchange rates and rising commodity costs. However, we are constructive about the stock’s performance given its unique strategy of expanding global footprint and brand management.

Where other competitors are investing in the rapidly emerging markets of Brazil, Russia, India and China, Clorox has decided to tap the opportunities available in the Middle East and other booming Asian economies. We believe that with less competition and penetration, along with healthy population sizes and rising incomes, these countries provide huge growth potential.

Further, Clorox's diversified brand portfolio positions it well above its peers to generate above-average industry growth and sustain itself in the currently challenging environment in the quarter to be reported. The company’s approach to brand management allows each of its brands to develop further, through rigorous research and development, marketing strategies, financial control and operating leverage. Given the strength of many of its brands coupled with opportunities in distribution, we believe that the company is set for significant growth.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows that these have the right combination of elements:

Kirby Corporation (KEX - Free Report) has an Earnings ESP of +3.08% and a Zacks Rank #1 (Strong Buy).

Avis Budget Group, Inc. (CAR - Free Report) has an Earnings ESP of +3.18% and a Zacks Rank #2 (Buy).

Anheuser-Busch InBev SA/NV (BUD - Free Report) has an Earnings ESP of +2.22% and a Zacks Rank #2.

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