Kimberly-Clark (NYSE:KMB), the consumer products giant behind some of the world's most popular brands including Huggies, Kleenex, Cottonelle, Kotex, and Scott, has scheduled its earnings for release on July 22 and strong results could kick off a rally in its stock. Kimberly-Clark already sports a healthy 3% dividend and returns billions of dollars to shareholders each year. Let's break down its most recent quarterly report and the expectations for the upcoming release, and then check in on one of its largest competitors, Procter & Gamble (NYSE:PG), to determine whether this should be the top stock on our long-term buy list.

Source: Kimberly-Clark

Breaking down the April release
On April 21, Kimberly-Clark released its first-quarter report to kick off fiscal 2014 and the results were mixed compared to expectations; here's a breakdown:

Earnings Per Share $1.48 $1.47
Revenue $5.28 billion $5.31 billion

Source: Benzinga

Earnings per share remained unchanged and revenue decreased 0.8% year-over-year, as global volume increased 3% and organic sales increased 4%. Gross profit increased 0.2% to $1.83 billion and operating profit increased 1.8% to $797 million, as the gross margin expanded 30 basis points to 34.6% and the operating margin expanded 40 basis points to 15.1%; these expansions were helped by costs of goods sold decreasing 1.2% and marketing, research, and general expenses decreasing 5.5%. 

Source: Kleenex's Facebook

Kimberly-Clark also noted that its cash provided by operations totaled $437 million in the first quarter and this, paired with the $1.05 billion in cash and cash equivalents it had to begin the quarter, allowed the company to repurchase 4.3 million shares of its common stock for approximately $464 million, pay $309 million in dividends, and retire $1 million in long-term debt.

Kimberly-Clark ended the quarter with 377.2 million shares outstanding compared to 384.7 million at the end of the first quarter a year ago, $5.39 billion in long-term debt, and $1.17 billion in cash and cash equivalents. 

Overall, it was a great quarter for Kimberly-Clark, regardless of the slight revenue miss, but the market reacted by sending its shares more than 1.4% lower. The shares have fluctuated quite a bit in the weeks since, but strong second-quarter numbers could help begin a sustained rally.

The expectations and what to watch for
Kimberly-Clark's second-quarter results are due out before the market opens on July 22 and the current expectations call for the following:

MetricExpectedYear Ago
Earnings Per Share $1.49 $1.41
Revenue $5.31 billion $5.27 billion

Source: Estimize

This set of expectations calls for Kimberly-Clark's earnings per share to increase 5.7% and revenue to increase 0.8% compared to the same period a year ago. Other than the key metrics, here are three other elements investors will want to watch for:

  1. Third-Quarter Outlook: It will be crucial for Kimberly-Clark to provide guidance for the third quarter that is within or above analysts' expectations; currently, the consensus estimates call for earnings per share of $1.56 and revenue of $5.38 billion, which represent year-over-year growth of 8.3% and 2.3%, respectively. 
  2. Full-Year Outlook: While providing satisfactory guidance for the third quarter, it will be crucial for the company to reaffirm its full-year outlook; this outlook projected earnings per share in the range of $6.00-$6.20, which represents growth of 4%-7.5% from fiscal 2013.
  3. Share Repurchases: Watch for the number of shares repurchased during the quarter and make sure Kimberly-Clark is on pace to achieve its goals for the year. In its fourth-quarter report released on Jan. 24, Kimberly-Clark stated that it planned to repurchase $1.3 billion-$1.5 billion worth of shares in fiscal 2014 and the $464 million repurchased in the first quarter gave it a better-than-expected start to the year. For the second quarter, it would be ideal to see repurchases totaling $275 million-$350 million.
If Kimberly-Clark can meet or exceed earnings expectations and satisfy the three elements above, and I think it will, the stock will likely see a surge of buying which would propel it higher; for these reasons and its juicy 3% dividend, I believe Foolish investors should initiate long-term positions right now and add to them on any weakness provided by the market following the earnings release.

Top competitor's results due out the following week

Source: Procter & Gamble

Procter & Gamble, the company behind brands such as Charmin, Tide, Gain, Gillette, Pampers, and Crest, has scheduled an earnings release of its own a little more than a week after the release from Kimberly-Clark, on August 1. Kimberly-Clark's release will give us a good look at the strength of the consumer and the consumer staples market, so P&G investors will want to pay close attention to it. Here are the current consensus analyst estimates for P&G's fourth-quarter report:

MetricExpectedYear Ago
Earnings Per Share $0.91 $0.79
Revenue $20.56 billion $20.66 billion

Source: Estimize

These estimates call for earnings per share to increase 15.2% and revenue to decrease 0.5% compared to the fourth quarter of fiscal 2013. Like Kimberly-Clark, it will also be important for P&G to provide an outlook that satisfies analysts' expectations, but P&G's most important outlook will cover the full year of fiscal 2015; currently, the consensus estimates call for earnings per share of $4.50 and revenue of $86.13 billion.

I believe P&G will meet the above earnings estimates and provide a solid outlook on fiscal 2015, but I still prefer Kimberly-Clark from an investment standpoint today. With this being said, those who are interested in or currently invested in P&G will want to watch Kimberly-Clark's report very closely, because it will be a strong indicator of things to come in P&G's release.

Source: Kimberly-Clark

The Foolish bottom line
Kimberly-Clark is one of the world's largest manufacturers of consumer products and it has become one of the most financially stable ones as well, thanks to its many successful cost-cutting programs. The company has scheduled its second-quarter earnings for release on July 22 and I think it will meet or exceed all of the expectations, which will push its share price higher.

I believe all Foolish investors should consider initiating long-term positions right now to take advantage of its undervalued share price and its high dividend yield, and add to these positions on any weakness provided by the market.