Smooth Sailing at Palm Harbor

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"A turnaround does appear to be possible here, and investors are well advised to observe Berkshire's example and take a look at companies in this industry."

So I opined six months ago, in reviewing the fiscal first-quarter 2006 earnings report from manufactured-home maker (no Stepford Wives jokes, please) Palm Harbor Homes (Nasdaq: PHHM). Little did I know then that the company would soon be handed a gift: a request to help supply temporary housing for the thousands of families soon to be displaced by hurricane season.

That gift got unwrapped last night in a big way. Analysts already knew that Palm Harbor had a good third quarter -- but they severely underestimated just how good. Up until a few hours ago, estimates for the company's quarterly earnings hovered in the $0.12 per-share range. That would already have been an improvement over the company's $0.20-per-share loss of one year ago. But as it turned out, the analysts still missed the mark by 50%: Palm Harbor earned $0.18 per share.

When last I checked, shares were still surging -- up more than 6% in after-market trading. By the time you read this, I expect they'll be surging still (yes, the news was that good). And not just at Palm Harbor. The 25% increase in sales over last year's numbers strongly suggests that demand for manufactured housing in the recently completed quarter couldn't possibly all be supplied by a single company. So it stands to reason that Palm Harbor's competitors (and one supplier as well) also benefited mightily this quarter. Investors can expect that when Champion Enterprises (NYSE: CHB) and Monaco Coach (NYSE: MNC) report their own earnings next month, when Fleetwood (NYSE: FLE) reports a month later, and when Thor (NYSE: THO) reports at a date to be announced, their numbers will be similarly impressive.

Not that investors will wait around for that to happen; rather, they'll buy now and wait in expectation of a run-up when the good news is confirmed. Speaking of run-ups, I expect that by the time you're reading this on Wednesday, Motley Fool Hidden Gems pick Drew Industries (NYSE: DW), which supplies parts to most of the major players, will be ticking upwards as well.

It remains to be seen how well these companies will fare once the hurricane-spawned business subsides. But for now, don't worry about that. If you own one of them, just enjoy the good news. If you don't yet own one (ideally one that hasn't yet reported earnings), now would be a good time to consider plucking one up.

For a couple broader reviews of the industry, try:

• Previews From the Trailer Park
• Trailer Park Treasures

Fool contributor Rich Smith does not own any of the companies mentioned in this article.