America's Car-Mart
What analysts say:
- Buy, sell, or waffle? Car-Mart has seating for four analysts: one buyer and three holders.
- Revenues. On average, they're looking for 2% sales growth tomorrow, to $59.4 million.
- Earnings. Profits, however, are predicted to fall 62% to $0.14 per share.
What management says:
The big news last quarter, as we've already related, was less what Car-Mart said, and more what it refused to say -- namely, how much it expected to earn in Q3. That's right, folks. The little company from Nasdaq appears to have joined the ranks of such NYSE stalwarts as 3M
Ordinarily, that's a move long-term investors should approve of -- but for now, we're holding our applause. Strictly speaking, Car-Mart only said it "will not provide earnings guidance for the remainder of fiscal 2007 due to the preliminary nature of the operational initiatives underway." That suggests the company may be afraid to let bad news leak out, rather than so confident in its long-term potential that it feels no need to worry about quarter-to-quarter results.
What management does:
As we described last quarter, Wall Street felt similarly unsure of Car-Mart's motives, selling the stock off despite better-than-expected performance last quarter. And you can't really blame investors for their skepticism. Over the last 18 months, we've seen nothing but gross, operating, and net margins plunging down, downer, and downest -- suggesting any news in the near term could be similarly bleak.
7/05 |
10/05 |
1/06 |
4/06 |
7/06 |
10/06 |
|
---|---|---|---|---|---|---|
Gross |
31.2% |
30.1% |
29.5% |
29.4% |
29.2% |
26.1% |
Operating |
14.1% |
12.8% |
12.4% |
12.4% |
11.9% |
8.8% |
Net |
8.5% |
7.5% |
7.3% |
7.1% |
6.7% |
4.6% |
One Fool says:
Much of the real news on Wednesday, I fear, will be of the "between-the-lines" variety -- meaning that the numbers might look bad, but they still won't tell the whole story about whether the company is improving. Again, you'll want to read last quarter's earnings write-up to get the full picture on what's happening, but briefly, the situation is this:
Car-Mart's customers are having a tough time paying off their loans. This is causing debts to go "bad," and forcing the company to write those debts off -- resulting in charges to earnings, last quarter's net loss, and this quarter's expected profits decline. Management intends to nip this trend in the bud with a series of measures aimed at (1) getting customers into rides more suitable to their budgets and (2) helping them understand what those budgets are, so the loans will get paid this time around. These initiatives, by their very nature, will take time to show their effects and are difficult to express numerically. The best I think we can hope for to tell us how well they're proceeding is perhaps a little "color" from management in the prose portion of Wednesday's release. Read carefully.
What did we expect out of Car-Mart last quarter, and what did it produce? Find out in:
3M and Coca-Cola are Motley Fool Inside Value picks. You can check out the newsletter free for 30 days.
Fool contributor Rich Smith does not own shares of any company named above. The Fool's disclosure policy has power windows.