Credit: Shutterstock photoWe expect Kimberly Clark CorporationKMB to beat expectations when it reports third-quarter 2015 results before the market opens on Oct 21. Last quarter, this consumer product giant posted a positive surprise of 3.68%. In fact, Kimberly-Clark has delivered positive earnings surprises in three of the last four quarters, with an average surprise of 3.39%.
Let's see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Kimberly-Clark is likely to beat earnings this quarter because it has the right combination of two key ingredients.
Positive Zacks ESP:Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +0.67%. This indicates a likely positive earnings surprise for shares.
Zacks Rank: Kimberly-Clark carries a Zacks Rank #3 (Hold) which, when combined with +0.67% ESP, makes us confident about an earnings beat.
Note that stocks with Zacks Rank #1, #2 or #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.
What is Driving the Better-Than-Expected Earnings?
Kimberly-Clark's cost saving initiatives and continued product innovation have been driving earnings for the past many quarters. The company also achieved higher organic sales on the back of volume growth and better pricing in the last five consecutive quarters.
Moreover, the spin-off of its health care business into a new company called Halyard Health, Inc. (HYH) in 2014 is allowing Kimberly-Clark to focus on its core portfolio. It has initiated a restructuring program in order to improve organizational efficiency and underlying profitability, increase the company's flexibility to invest in targeted growth initiatives and offset overhead costs stemming from the spin-off.
Though Kimberly-Clark anticipates a sluggish sales trend in 2015 as it faces currency volatility and increased competition in its diapers segment, we expect the above-mentioned positives to continue to drive earnings in the to-be reported quarter as well.
Other Stocks to Consider
Stocks worth considering in the consumer staples sector that have both a positive earnings ESP and a favorable Zacks Rank are:
Flower Foods Inc. FLO , with an Earnings ESP of +4.17% and a Zacks Rank #2 (Buy).
The J. M. Smucker Company SJM , with an Earnings ESP of +0.66% and a Zacks Rank #2.
Pinnacle Foods, Inc. PF , with an Earnings ESP of +2.22% and a Zacks Rank #3.
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KIMBERLY CLARK (KMB): Free Stock Analysis Report
SMUCKER JM (SJM): Free Stock Analysis Report
PINNACLE FOODS (PF): Get Free Report
FLOWERS FOODS (FLO): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
