Kimberly Clark Corporation
) 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
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
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.
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
, 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
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
Green Mountain Coffee Roasters Inc.
), Earnings ESP of +4.00% and a Zacks Rank #2 (Buy).
Kraft Foods Group Inc
), Earnings ESP of +1.47% and a Zacks Rank #3 (Hold).
), Earnings ESP of +1.24% and a Zacks Rank #3 (Hold).
GREEN MTN COFFE (GMCR): Free Stock Analysis
KIMBERLY CLARK (KMB): Free Stock Analysis
KRAFT FOODS GRP (KRFT): Free Stock Analysis
LORILLARD CO (LO): Free Stock Analysis Report
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