Foolish Forecast: Will Chattem's Recent Results Prove Soothing?

Shares of health-care and consumer-products firm Chattem (Nasdaq: CHTT) are hitting new highs as investors migrate to defensive names to stem volatility from more economically sensitive firms. Excitement over an acquisition of a stable of consumer brand names is also helping matters, and Fools will learn more once Chattem reports third-quarter results tomorrow. Here's what to expect.

What analysts say:

• Buy, sell, or waffle? Ten analysts currently follow Chattem; three are bullish on the stock, six have hold ratings, and one is bearish on the name. The Motley Fool CAPS community has given Chattem a three-star rating (out of five stars).
• Revenues. Analysts are projecting $106 million in third-quarter sales for about 47% year-over-year growth.
• Earnings. Analysts expect quarterly earnings of $0.74, or 72% above the $0.43 reported in last year's quarter.

What management says:
Back when Chattem announced second-quarter results, management said it expected full-year earnings of $3.00-$3.19 "on the continued strength of our base business and the successful integration of the acquired brands to date."

What management does:
Chattem recently added five names to its stable of brands, benefiting from the sale of Pfizer's (NYSE: PFE) consumer product business to Johnson & Johnson (NYSE: JNJ), as mighty J&J had to sell the brands to get the deal to go through. As you can see from the chart below, Chattem was already a highly profitable operator before the acquisition, and hopefully the new purchase will help fuel future growth and improve profitability.

Margins	02/06	05/06	08/06	11/06	02/07	05/07
Gross	70.7%	69.7%	68.8%	68.7%	68.8%	68.9%
Operating	25.9%	24.4%	22.6%	21.1%	22.9%	25.2%
Net	14.4%	12.5%	14.2%	15%	13.9%	13.9%

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:
Chattem may be just the right medicine to stem volatility in Foolish portfolios; consumer brand companies like Chattem, Procter & Gamble (NYSE: PG), and Colgate (NYSE: CL) tend to post stable results regardless of the macroeconomic environment.

However, most of the easy money has probably already been made in Chattem and the shares now trade at more than 19 times forward earnings. In other words, sales upside and profitability enhancements from the recent brand purchases are likely already reflected in the valuation.

Related Foolishness:

• Chattem Looks Toward a Record '08
• Icy Hot Results From Chattem
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