Foolish Forecast: A Lagging Lafarge?

On Monday morning, rock miner and cement mixer Lafarge North America (NYSE: LAF  ) will emerge from its quarry to announce earnings results for Q3 2005. Considering how well the U.S. residential and commercial construction markets are still doing, and the beneficial effects that can be anticipated from the recently signed federal highways law, it's not surprising that Wall Street is optimistic about the numbers we will see. Banner results reported late last month by rival cement company Cemex (NYSE: CX  ) also lend credence to the theory that cement makers in general have done well in Q3.

The "consensus" (I'll explain the quotation marks in a moment) estimates for Lafarge call for the company to report $1.49 billion in revenues, and $2.58 per diluted share in earnings. If achieved, those targets would equate to 19% year-over-year growth in both sales and profits. But the company will need every bit of the hypothesized profits this quarter, and an even greater pile of profits in Q4, if it's to hit consensus estimates of $4.85 for the year. Because in the first six months of this year, it's so far only managed to amass $0.60 worth of losses.

Although macroeconomic factors do seem to favor the company's chances of hitting its targets in this quarter and the next, there is still some room for doubt. Only four analysts follow the company, and according to Yahoo! Finance, only two have posited numbers for Lafarge for this quarter, so there's a fairly large margin for error to creep into those predictions.

Perhaps more significant is a recent statement put out by Lafarge's parent company, Lafarge SA (NYSE: LR  ) . The French cement giant issued an earnings warning late last month, in which it advised analysts not to expect it to hit its previously announced target for profits growth. In making this warning, the parent company laid the blame for its likely earnings disappointment squarely on the shoulders of its subsidiary, and specifically, on sales weakness noticed in the northeast.

Such "weakness," if confirmed by Lafarge on Monday, would deal a blow to expectations established by the company in its July earnings report. Back then, the company predicted continued strong demand for its products in H2. While it named several possible challenges to its profitability, including high transportation and energy costs, weakness in demand was not even hinted at. If it materializes on Monday, investors could be very unpleasantly surprised indeed.

For more Foolish musings on the exciting world of cement production, read:

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Fool contributorRich Smithowns no shares in any company mentioned in this article.

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