Headwaters Earnings Preview

If Headwaters (NYSE: HW  ) misses estimates again, it will be the third consecutive quarter for the company. The company will unveil its latest earnings Tuesday. Headwaters provides products, technologies and services in three industries: light building products, heavy construction materials, and energy technology.

What analysts say:

• Buy, sell, or hold?: Analysts generally think investors should hang on to Headwaters, with half rating the stock a hold. Analysts don't like Headwaters as much as competitor PGT overall. Three out of five analysts rate PGT a buy compared with two of four for Headwaters. Headwaters' rating hasn't changed over the past three months.
• Revenue forecasts: On average, analysts predict $186.2 million in revenue this quarter. That would represent a decline of 3.1% from the year-ago quarter.
• Wall Street earnings expectations: The average analyst estimate is a loss of $0.01 per share. Estimates range from a loss of $0.07 to a profit of $0.03.

What our community says:
CAPS All-Stars are solidly backing the stock with 93.4% giving it an "outperform" rating. The community at large agrees with the All-Stars with 93.3% assigning it a rating of "outperform." Fools are bullish on Headwaters and haven't been shy with their opinions lately, logging 377 posts in the past 30 days. Despite the majority sentiment in favor of Headwaters, the stock has a middling CAPS rating of three out of five stars.

Management:
A year-over-year revenue decrease last quarter snaps a streak of three consecutive quarters of revenue increases. The company's gross margin shrank by 7.7 percentage points in the last quarter. Revenue fell 0.8% while cost of sales rose 8.9% to $109.6 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

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