After a strong run in 2013, in which its shares rose 26.7%, Clorox and its investors want to start off 2014 with a bang. This bang could come in the company's second-quarter earnings release on Feb. 4 because the current estimates call for negative year-over-year growth, making for very low expectations. The stock currently sits more than 7.5% below its 52-week high, so let's take a look and see if we should be buying now or if we should wait for further weakness.

The king of bleach
Clorox is a leading manufacturer and marketer of consumer and household products. It is home to some of the most popular brands that we use every single day, such as Clorox, Tilex, Kingsford, Pine-Sol, Liquid-Plumr, Burt's Bees, and Hidden Valley; in fact, 90% of Clorox's brands hold the No. 1 or No. 2 market share in their categories.


Source: Clorox.com.

The quarterly beat
On Oct. 31, Clorox released first-quarter earnings that exceeded expectations on both the top and bottom lines. Here's an overview of the report:

Metric Reported Expected
Earnings Per Share $1.03 $1.00
Revenue $1.36 billion $1.35 billion

Earnings per share and revenue grew 2% year over year, while the company's gross margin remained flat at 42.9%. Volume for the quarter rose 1% versus estimates of zero growth, primarily driven by charcoal sales and strength in the Burt's Bees brand. 

These results surprised Wall Street because there was a lot of negativity surrounding the company following three analyst downgrades. I did not agree with these analysts and recommended initiating a position on the weakness, and the stock proceeded to rise more than 12% to its 52-week high. Looking back, it was the right move to make and analysts may think twice before going against this giant in the future.

The upcoming report
Second-quarter results for fiscal 2014 are due out before the market opens on Feb. 4. The current expectations call for declines on both the top and bottom lines and look like this:

Metric Expected Year Ago
Earnings Per Share $0.91 $0.93
Revenue $1.32 billion $1.325 billion

These estimates call for earnings to decline 2.1% and revenue to fall 0.4% from the same period a year ago. The first quarter was far from impressive, but I do not believe Clorox will report negative numbers year over year; I expect both earnings and revenue to be in the range of unchanged to 1% growth. With this said, there is much more to watch for than just the key earnings metrics.

What else to watch for
In the earnings report, it will be important to watch for continued strength in the Burt's Bees brand. It has been the only high-growth brand for Clorox over the last few quarters, including double-digit volume growth in the first quarter, so Clorox really needs it to keep the momentum going. I think Burt's could show volume growth of 8% or more in the second quarter, driven by its core products but supported by better-than-expected growth in Burt's Bees baby products and the new line of natural pet-care products.

The Burt's Bees Natural Pet Care line was released at PetSmart, Petco, and other specialty pet stores in April 2013. This is important to note because the American Pet Products Association estimates that $55.5 billion was spent on pets in 2013, and this number could easily surpass $58 billion in 2014. As the largest provider of pet products in America, PetSmart will continue to benefit from this growth, and the brands within, like Burt's Bees, will have the potential to generate record sales.

An industry of dividend growers
The consumer-products industry is home to some of the highest dividends -- and best track records of increasing these dividends -- in the market. Among these leaders are Clorox, Procter & Gamble and Kimberly-Clark . Procter & Gamble is the company behind global brands like Tide, Pampers, Charmin, Duracell, Gillette, and Crest, while Kimberly-Clark is home to brands such as Kleenex, Cottonelle, Depend, Huggies, Kotex, and Scott. Take a look at these key dividend-related statistics:

CompanyCloroxP&GKimberly-Clark
Began paying dividends  1968 1890 1934
Consecutive years of increases 37 57 41
Current yield 3.2% 3.00% 3.1%

For the second quarter, I expect Clorox to maintain its dividend of $0.71, as the company has a reputation of saving its increase for the third quarter. Speaking of reputations, Kimberly-Clark will likely announce its dividend increase in its first report of the new year, due out on Jan. 24, as it has done for the last few decades. I am a fan of this tradition because it starts the year off right for investors who love their dividends.

Finally, an increase from Proctor & Gamble will come at some point, as the company has ample free cash flow, but there is no pattern telling when it will happen. In terms of which to own, I believe Clorox and Kimberly-Clark are the two stocks with the most upside, but Procter & Gamble would be worth buying on any significant pullback due to its incredible $25 billion brands.

The Foolish bottom line
Clorox is an American titan that has the potential to exceed analyst estimates in its upcoming earnings report. The current expectations call for negative growth, but I believe its brands will provide better-than-expected volume growth driven by Burt's Bees. Keep a close eye on this one and consider buying it before the report or on any weakness following its release.

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The article Clorox Sets Its Sights on Another Quarterly Beat originally appeared on Fool.com.

Fool contributor Joseph Solitro owns shares of Clorox. The Motley Fool recommends Kimberly Clark, PetSmart, and Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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