Foolish Forecast: Clear Sailing for Lakeland?

Most companies out there in Wall Street land are just getting started with their fiscal years 2006. A few are still wrapping up 2005. But protective clothing manufacturer and Motley Fool Hidden Gems "Tiny Gem" designee Lakeland Industries (Nasdaq: LAKE  ) is far ahead of the pack -- calendar-wise, at least. When Lakeland reports earnings on Monday morning, the news will be on Q4 and full-year 2006.

What analysts say:

  • Buy, sell, or waffle? Only one analyst (not counting us Fools, that is) tracks Lakeland, giving the company a buy rating.
  • Revenues. There's no sales estimate on record.
  • Earnings. But the analyst estimates that quarterly profits rose 44% this past quarter, to $0.36 per share.

What management says:
In its December earnings report, Lakeland addressed the effect of rising raw materials costs on its business. Because the firm has been able to raise the prices on its goods (i.e., pass the higher costs along to its customers) and control selling, general, and administrative costs, its profits are rising despite the higher costs of goods sold. Lakeland also highlighted its prescient purchase of large stocks of raw material inventories in late 2005, which was partly in anticipation of price hikes on these goods, and partly in order to meet surging sales orders that the firm began seeing in November. As a result, he company predicted significant margin expansion throughout this quarter and well into fiscal year 2007.

What management does:
In recent quarters, the company has indeed grown its gross margins. Although operating margins are unchanged from 18 months ago, at last report the company is netting 30% more profits from each dollar of sales now than it was back in the July 2004 quarter.

Margins %




























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

One Fool says:
Ordinarily, investors should be wary of a firm that grows inventories 61% on a sales increase of 1% (that's called "understatement," folks). But if you dig deeper into the inventory picture, you'll see that fiscal Q3 inventories of raw materials grew fastest of all (up 92%), which is consistent with the firm's description of its inventory strategy.

I'm still leery of the fact that finished goods also vastly outgrew sales gains -- up 45%. But judging from the firm's performance over the past year and a half, I'm inclined to give Lakeland the benefit of the doubt here for the time being.


  • Alpha Pro Tech (AMEX: APT  )
  • Mine Safety (NYSE: MSA  )
  • Dupont (NYSE: DD  )
  • Kimberly Clark (NYSE: KMB  )

LakelandIndustries is a Motley Fool Hidden Gems "Tiny Gem" designee, and Mine Safety is a Hidden Gems pick. Take Hidden Gems for a 30-day free trial run.

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

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 512811, ~/Articles/ArticleHandler.aspx, 10/22/2016 7:48:23 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 22 hours ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:01 PM
APT $3.53 Up +0.04 +1.15%
Alpha Pro Tech CAPS Rating: ***
DD $69.70 Up +0.24 +0.35%
DuPont CAPS Rating: ****
KMB $119.58 Up +0.41 +0.34%
Kimberly-Clark CAPS Rating: ****
LAKE $10.00 Down -0.05 -0.50%
Lakeland Industrie… CAPS Rating: *
MSA $57.63 Up +0.01 +0.02%
MSA Safety CAPS Rating: *****