Consumer products company Chattem (NASDAQ:CHTT) will report Q1 2007 financial results on Thursday, March 22. Here's a look at whether its gold will bond to its shares or leave another icy-hot patch for investors.

What analysts say:

  • Buy, sell, or waffle? There's definitely a bit of cramping going on amongst the 12 analysts covering Chattem, for whom Pamprin might be the prescription. Their mood has turned dour, as two now recommend selling the stock, six say hold, and four (undoubtedly feeling a Dexatrim rush) say buy.
  • Revenues. Revenues are expected to jump 21% to $101.4 million, as the company acquired five new products from Johnson & Johnson (NYSE:JNJ).
  • Earnings. Profits, however, are expected to be at $0.61 per share, down from $0.75 a year ago.

What management says:
Chattem markets a large portfolio of popular consumer products -- everything from Gold Bond medicated powder to Bull Frog sunblock. Although acquisitions continue to be a large part of its growth strategy, it actually makes 60% of the products it sells and reports it "touches" -- packaging or distributing -- 85% of them. The products end up being some of the top sellers in their respective categories.

Despite a rocky start to the launch of its Icy-Hot Pro-therapy product, which sustained losses of $0.40 per share last year, it is expecting breakeven performance this year for that product, while its other products should continue their strong advance.

What management does:
Margins have been slipping at Chattem, as it has experienced higher costs for new product launches as well as boosting advertising support for existing lines. Net margins, however, have been helped as Chattem realized a number of one-time gains, such as settling its Dexatrim litigation. Earnings per share have been bolstered by the company buying back its shares -- 1.2 million of them, at a cost of $39 million.

Margin

11/05

02/05

05/06

08/06

11/06

Gross

71.4%

70.7%

69.7%

68.8%

68.7%

Operating

27.0%

25.9%

24.4%

22.6%

21.1%

Net

12.9%

14.4%

12.5%

14.2%

15.0%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Considering the position of its products in the market -- most are ranked No.1 or No. 2, including those just acquired from J&J -- and an expectation of a move toward profitability for its Icy-hot product, Chattem should be able to realize substantial gains. While it won't have the benefit of the one-time gains it's had in the recent past, it still has strong distribution channels through Wal-Mart (NYSE:WMT), Walgreen (NYSE:WAG), and Kroger (NYSE:KR) that should give any new products prime shelf real estate.

Few consumer products companies sell at what would appear to be a discount, but Chattem has multiples that exceed those of Johnson & Johnson and Pfizer (NYSE:PFE). So while the business looks strong, compared to its competitors, the stock looks too expensive for this Fool.

Related Foolishness:

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Fool contributor Rich Duprey owns shares of Wal-Mart, but does not own any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.