Foolish Forecast: Zebra in the Stable

It's once again time to check in on our favorite non-domesticated equine, folks. Specialty printer-maker Zebra Technologies (Nasdaq: ZBRA  ) makes its first report of the new fiscal year tomorrow. Here's what you need to keep in mind when counting Zebra's Q1 2006 stripes.

What analysts say:

• Buy, sell, or waffle? Only six analysts track Zebra, splitting their votes down the middle: three buys and three holds.
• Revenues. Analysts expect Zebra to report 5.5% sales growth, to $180.2 million.
• Earnings. And earnings are believed to have tracked sales growth, with the consensus calling for 5.4% growth to $0.39 per share.

What management says:
Zebra's management seems intent on painting a positive picture over results that seem considerably less than glowing. Reviewing last year's performance in February, CEO Edward Kaplan pronounced himself "pleased" with the firm's 6% revenue growth and 7% decline in profits and promised to "create even greater value for stockholders over the long term."

What management does:
I suspect that Zebra shareholders are something less than pleased, however, with Zebra's stock having fallen 10% over the past year as the S&P 500 rose 13%. The way things have been going recently, pretty much anything Zebra can do right should suffice to "create even greater value for stockholders." But continuing as it has been will accomplish the opposite.

Thanks in part to the perennially cited changes in "product mix," as well as higher warranty costs and adverse foreign exchange movements, Zebra's margins continued their downward march last quarter. And over the past 18 months, margins have fallen across the board, with the rolling gross falling 100 basis points, and rapidly rising selling, general, and administrative costs, and also research and development costs, pushing operating and net margins down even further.

Margins	10/04	12/04	4/05	7/05	10/05	12/05
Gross	51.4%	51.8%	51.5%	51.2%	50.9%	50.4%
Op.	26.0%	26.7%	25.9%	24.8%	23.9%	22.2%
Net	17.8%	18.2%	17.6%	16.9%	16.5%	15.9%

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:
Zebra's problems don't stop there, either. In addition to looking for improvements in margins tomorrow, you'll want to also keep an eye on the balance sheet, where 3% sales growth over the last six months has been outstripped by 13% growth in inventories and a 9% rise in accounts receivable.

Let's end on a happy note, shall we? There's so much broken at Zebra right now that the firm is practically swimming in opportunities to "create even greater value for shareholders." We wish it luck.

Competitors:

• Fargo (Nasdaq: FRGO  )
• Hewlett-Packard (NYSE: HPQ  )
• Lexmark (NYSE: LXK  )
• Paxar (NYSE: PXR  )
• Printronix
• Xerox (NYSE: XRX  )
• Sony (NYSE: SNE  )

Fool contributor Rich Smith does not own shares of any company named above.