It's been a disappointing two-year stretch for Kimberly-Clark (NYSE:KMB) investors. The consumer goods giant lowered its growth outlook several times since early 2016 due to struggles in the core U.S. market. As a result, management is now projecting flat organic sales this year compared to a 2% uptick last year and a 5% boost in 2015.

Shareholders aren't expecting the generally poor industry outlook to change when Kimberly-Clark announces third-quarter results on Monday, Oct. 23. But the company might have good news to share when it comes to profitability and cash returns. With that in mind, let's take a closer look at what investors can expect from Monday's earnings report.

A baby sitting on the floor and playing with rolls of tissue paper.

Image source: Getty Images.

Organic growth

Kimberly-Clark's tissue, diaper, and cleaning brands are sold in 175 countries around the world. But it generates most of its revenue, and more than two-thirds of profits, from the U.S. market. That geographic focus has produced a bigger sales slump for the company than rivals as the U.S industry slows to a halt. Procter & Gamble (NYSE:PG), for example, is enjoying a minor growth rebound and Unilever is on pace to expand revenue by about 4% this year.

In contrast, Kimberly-Clark lowered its 2017 outlook in late July for the second straight time, and so investors have only modest expectations heading into Monday's report. Still, while the company is likely to post flat organic sales, keep an eye on the mix of volume and pricing changes. If volumes turn negative, or if price cuts accelerate in the context of weak demand, that would suggest a further weakening of its core industry.

Cost cuts

While it has underperformed growth expectations this year, Kimberly-Clark is running ahead of management's plan when it comes to cost cuts. Executives cleaved $120 million out of the expense base last quarter alone, and the move helped protect operating income as sales fell.

KMB Operating Margin (TTM) Chart

KMB Operating Margin (TTM) data by YCharts.

The company plans to save as much as $450 million through this initiative over the full year. That will result in an operating margin that compares well with industry giants. Given P&G's recent success, where cost cuts helped push profitability up by 3 percentage points since 2013, Kimberly-Clark might have room for dramatic gains here. But management will have to balance the temptation to boost short-term results against investing in long-term growth through marketing, R&D, and manufacturing spending.

Cash returns

Kimberly-Clark's efficient operation means that it generates healthy cash flow even in challenging sales environments. Operating cash over the past six months was $1.3 billion, which funded $600 million of stock buybacks and $674 million of dividend payments. Both cash return channels should continue at about the same pace for the second half of the fiscal year despite the weak outlook on the top and bottom lines.

If growth takes another step lower, though, that would raise pressure on the company to juice investor returns through more aggressive financial moves. P&G, after all, just finished its biggest year of direct cash returns yet with help from funds it raised by selling off a big portion of its brand portfolio. Kimberly-Clark hasn't hinted at such a dramatic move in its own business. Still, a third straight year of declining sales growth could force management to look for more creative ways to produce improving returns.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends Unilever. The Motley Fool has a disclosure policy.