What's in a name? Does a rose really smell as sweet if you call it, say, stinkweed? I suspect not. Some things just really fit the names they've been given. Case in point: La-Z-Boy (NYSE:LZB). The company is scheduled to report earnings tomorrow but, surprise, surprise, it won't get around to it until after the rest of the market has gone home for the evening.

Wall Street Wisdom:

  • General consensus. Eight analysts track La-Z-Boy's fortunes. Four of them rate the stock a buy, and the rest vote hold or sell.
  • Revenues. Although La-Z-Boy predicted flat year-over-year sales of $507 million for this quarter, analysts are taking a more conservative view. The consensus estimate is that La-Z-Boy managed to record just under $504 million in sales in Q3.
  • Earnings. In contrast, the analysts agree with La-Z-Boy's prediction of $0.13 to $0.17 per share in profits. Their estimate of $0.15 per share sits squarely in the mid-range of company guidance.

Margin watch:
La-Z-Boy's margin performance is a bit of a mixed bag. Gross margins haven't varied much over the past 18 months. However, the high energy and fuel costs plaguing the furniture industry have taken a bite out of the company's operating performance, hurting net profits in consequence.

Margins %

7/04

10/04

1/05

4/05

7/05

10/05

Gross

22.7

23.0

24.0

23.1

23.6

22.0

Op.

1.4

3.1

4.3

5.2

1.7

0.1

Net

(0.8)

1.7

2.1

3.7

0.7

(1.4)

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

Foolish forensics:
There's no question that La-Z-Boy is going through a bit of a rough patch now. The numbers show it, and the company's own statements back it up. What should be more important for long-term investors, however, is how the company deals with this difficult situation.

Sales have been declining in each of the past two quarters (when compared with their year-ago equivalents), but is the company piling up inventory and letting customers slide on their bill payments? Not at all. In both the October and July quarters, we saw La-Z-Boy's accounts receivable and inventories decline as sales contracted. As a result, the company's free cash flow surged in Q1, and negative free cash flow contracted year over year in Q2. Based on what we saw in H1 2005, therefore, I'd say La-Z-Boy is on the right track.

La-Z-Boy is a recommendation of Motley Fool Income Investor. Try a 30-day guest pass.

Fool contributor Rich Smith does not own shares of La-Z-Boy.