How Kimberly-Clark's Earnings Will Fare

On Friday, Kimberly-Clark (KMB -0.28%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed, knee-jerk reaction to news that turns out to be exactly the wrong move.

In a shaky market, investors turn to defensive stocks like consumer-products makers to protect their portfolios from big losses. But with cost pressures throughout the industry, Kimberly-Clark has had to take its own steps to bolster growth and protect profit margins. Let's take an early look at what's been happening with Kimberly-Clark over the past quarter and what we're likely to see in its quarterly report.

Stats on Kimberly-Clark

Source: Yahoo! Finance.

Will Kimberly-Clark deliver the goods with earnings this quarter?
Analysts have been cautiously optimistic about Kimberly-Clark's earnings prospects in recent months, having boosted their estimates for the just-ended quarter by $0.03 per share, even as they kept their full-year 2013 estimates stable. The stock, meanwhile, has soared to new all-time highs, jumping nearly 20% since early January.

Kimberly-Clark has done a good job of working through challenging times for the industry. Rising costs for raw materials that consumer goods companies use to make their finished products have strained margins for many companies, with Procter & Gamble seeing long-term deterioration in gross margins and falling revenue since 2008. By contrast, Kimberly-Clark has managed to post annual sales rises of about 2.5% since then, a slow but still much better growth figure.

More recently, input costs have moderated somewhat. That helped the company post good results last quarter and could continue to boost its earnings for the first quarter as well.

Another contributing factor to Kimberly-Clark's strong performance may well prove to be the flu outbreak that hit the U.S. over the winter. Johnson & Johnson recently reported favorable results in its over-the-counter medication business, with Tylenol and other pain-relief medications being likely picks among flu sufferers. Kleenex may be a bit more of a stretch, but it'll be interesting to see whether flu sufferers actually do use more of it when they're sick.

One interesting move that Kimberly-Clark made recently was its purchase of privately held Life-Tech's anesthesia business. The purchase will take its needle, catheter, and nerve-block accessories business in-house at Kimberly-Clark, which had previously sold Life-Tech's products as a third-party distributor.

In Kimberly-Clark's earnings report, be sure to watch for the impact that the recent currency devaluation in Venezuela has on its bottom line. The one-time factor shouldn't be a huge deal, but it may nevertheless take a bit of the shine off Kimberly-Clark's recent stock performance.

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