The firm whose name is nearly synonymous with the concept of leisure -- RV maker Winnebago (NYSE:WGO) -- parks it on Wall Street Friday morning. Will its fiscal third-quarter 2007 earnings report be a load off of investors' minds?

What analysts say:

  • Buy, sell, or waffle? Eight analysts hitch a ride with Winnebago. Three say buy. Five say hold.
  • Revenues. On average, analysts are looking for 13% sales growth to $248.2 million.
  • Earnings. Profits are predicted to rise 22.5% to $0.49 per share.

What management says:
When last we checked in on Winnebago, the news visible in the rearview mirror was, at best, mixed. In the words of CEO Bruce Hertzke: "Net income for the quarter was negatively impacted by lower volume, which was more than offset by increased financial income and a lower effective tax rate." In other words, sales were weak, but earnings from financing those sales, and a smaller bite out of the profits by Uncle Sam, saved the day.

News for the future was less optimistic. The fiscal Q2 report showed that order backlogs for Class A gasoline vehicles rose 40%, and backlogs on Class A diesel motor homes were up 60%.These models began shipping in Q3, and that's why Wall Street expects Friday's earnings news to be so good. It also could be why company President Ed Barker picked this quarter to retire from Winnebago, to be replaced by 37-year veteran Bob Olson -- Barker wants to leave on a high note. We'll see how well that works out for him, tomorrow.

What management does:
Actually, investors would probably be pleased if Winnebago managed to just stop squealing out low notes. The margin trends reflected in the table below travel just one long road (and not even a winding one) down. Well, it could be worse -- rivals Fleetwood (NYSE:FLE) and Monaco (NYSE:MNC) aren't profitable at all anymore.

Margins

11/05

2/06

5/06

8/06

11/06

2/07

Gross

13.4%

12.9%

12.6%

12.1%

11.4%

11.3%

Operating

9.6%

9.1%

8.6%

7.3%

6.3%

6.2%

Net

6.3%

6.0%

5.7%

5.2%

4.6%

4.6%
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:
Even if tomorrow's sales numbers match the optimism of yesterquarter, however, Winnebago may still lack the room necessary to complete an on-road U-turn. Reviewing the firm's numbers for the first half of 2007, we see that sales averaged 8% lower than they did in the first half of 2006. Cost of goods sold (COGS) aren't falling as rapidly as sales (down just 7%), while selling, general, and administrative (SG&A) costs are actually rising (4%).

Now, SG&A makes up a much smaller portion of Winnebago's cost of putting RVs on the road, compared with COGS. So, relatively speaking, reducing SG&A growth isn't as important to Winnebago as controlling the rise in the parts needed to build its wares. Unfortunately, according to Winnebago supplier and Motley Fool Hidden Gems recommendation Drew Industries (NYSE:DW), reduced COGS probably isn't in the cards in the near future. As we discussed last quarter, "upward pressure on raw-material costs [is squeezing Drew's] operating margins mightily. As when faced by this problem in the past, Drew intends to seek price increases from its customers."

For a closer look at Winnebago's second-quarter odometer reading, read "Winnebago Finds the Gas." And for more information on the firm that helps Winnebago build all the new RVs we'll (hopefully) be hearing were sold last quarter, grab yourself a free copy of Motley Fool Hidden Gems for the road.

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.