Foolish Forecast: Columbia Calling

Have you ever met a "perfect" stock? If not, then allow me to introduce you to Motley Fool Hidden Gems recommendation Columbia Sportswear (Nasdaq: COLM). This clothier has never (ever) missed an earnings target. Anyone want to bet it's going to break that record when third-quarter 2007 results come out Thursday afternoon?

What analysts say:

• Buy, sell, or waffle? Nineteen analysts follow Columbia, which garners eight buy ratings and 11 holds.
• Revenue. On average, they expect to see sales grow 3% to $466.7 million.
• Earnings. Profits are predicted to slip 4.8% to $1.59 per share.

What management says:
In the face of anemic sales growth (up 3% year over year last quarter, with a similar rise expected to be announced this week), Columbia's management is doing its best to squeeze every last possible penny of profit out of the sales dollars it does get. As CEO Tim Boyle described it in last quarter's report, the focus is on "continued ... operating margin improvement," comprised of "continued improvements in sportswear [gross] margins" and "a higher mix of full price sales." "Favorable currency exchange rates" are also helping out.

What management does:
And it's paying off. Rolling gross margins increased for the second straight quarter in Q2, with operating and net margins tagging along for the ride, as management exercises "diligent expense management." Among sportswear makers, Columbia sports an industry-leading operating margin, far ahead of rivals Timberland (NYSE: TBL) and Quiksilver (NYSE: ZQK), and with a smaller lead over the likes of Nike (NYSE: NKE), VF (NYSE: VFC), and Under Armour (NYSE: UA).

Margins	3/06	6/06	9/06	12/06	3/07	6/07
Gross	43.4%	43.2%	42.4%	42.0%	42.2%	42.7%
Operating	15.6%	15.0%	14.4%	14.0%	14.4%	14.8%
Net	11.0%	10.7%	9.8%	9.6%	9.8%	10.2%

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:
Sound pretty good so far? Then you'd better zip up and get ready for a cold dose of reality, Fools. The analyst estimates noted above assume that Columbia will hit the top of its sales guidance range (management promised "2 to 3 percent," but the analysts apparently only heard the second number). Even more dangerous to investors, Boyle predicted that profits would come in at $1.58 per share on Thursday, yet Wall Street is counting on $0.02 more. This worries me, in light of Boyle's comments about "higher than expected order cancellations in the U.S. attributable to a challenging retail environment" last quarter.

Seems to me that the analysts have set Columbia up to fail this week. But if it does, it'll be a first.

For more Foolishness:

• Last year's third-quarter figures were rained on.
• At the beginning of this year, Columbia sported slick metrics.
• Will the company be a Halloween treat again this year?