Kimberly Clark Corporation (KMB) is set to report third-quarter 2014 results before the opening bell on Oct 21. Last quarter, this consumer product giant posted a negative surprise of 0.60%. Let’s see how things are shaping up prior to the announcement.
Factors to Consider
Lower consumer spending pattern due to an adverse macro-economic environment, unfavorable currency and higher input costs remain headwinds for the company.
The company has been reporting dismal sales since the past few quarters signaling weakness in the overall consumer spending environment. High input costs and unfavorable currency have reduced operating profit and have been offsetting the gains from organic sales growth and cost saving initiatives. In fact, the company predicts higher input costs for the remainder of 2014, which may further hurt margins in the upcoming quarter.
During the last reported quarter, Kimberly-Clark also narrowed its guidance for full year 2014 adjusted earnings. The company expects adjusted earnings in the range of $6.00 – $6.15 per share, lower than the prior guidance range of $6.00-$6.20 for 2014.
Also, Kimberly-Clark’s health care segment has been witnessing decelerated sales growth since the last few quarters. The segment operates on low margins and has been negatively impacting other segments. The company decided to shed its health care business to focus on its core consumer and professional brands, optimize its performance and offer flexibility to pursue its own value-creation opportunities. The spin-off will be completed on Oct 31.
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 you will see below.
Negative Zacks ESP:The Expected Surprise Prediction or ESP for Kimberly-Clark is -1.30% as the Most Accurate Estimate of $1.52 is below the Zacks Consensus Estimate of $1.54 per share.
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
Other stocks worth considering in the consumer staples/retail sector that have both a positive earnings ESP and a favorable Zacks Rank are:
Post Holdings, Inc. (POST), with an Earnings ESP of +50.0% and a Zacks Rank #1 (Strong Buy).
Dunkin' Brands Group, Inc. (DNKN) with an Earnings ESP of +2.13% and a Zacks Rank #3 (Hold)
Newell Rubbermaid Inc. (NWL), with an Earnings ESP of +1.82% and a Zacks Rank #3.
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