Adhesives, sealants, and coatings maker HB Fuller (NYSE:FUL) will report Q4 2006 financial results on Jan. 16, and it looks as though they'll be painted black.

What analysts say:

  • Buy, sell, or waffle? The six analysts covering the stock are painting with a broad brush when they all say "buy."
  • Revenues. Revenues are expected to edge up 7% to $442.3 million.
  • Earnings. Profits, however, are expected to jump 15%, to $0.46 per share.

What management says:
HB Fuller has been repositioning itself to focus entirely on its most profitable businesses, selling off divisions that did not meet those goals while bringing others into the fold. The task has led to some lumpy performance, with sales off at the beginning of the year but rising steadily throughout. Analysts are expecting fourth-quarter sales that will nearly double the rate of revenue growth for the first nine months of the year. That will probably be achieved through higher prices, since sales volumes have been lower.

Overall sales were up nearly 9% last quarter, even though Fuller's global adhesives segment, which accounts for 64% of revenues, was down slightly from the year before. It was boosted by its specialty segment, which increased revenues 29% year over year through a combination of acquisitions and higher-priced sales.

What management does:
Not every company under reorganization can immediately resume profitability, but shedding its worst-performing assets has helped HB Fuller grow both top- and bottom-line profits right away. Of course, the company has also benefited from a lower-than-normal tax rate, thanks to the geographic mix of products it sells. In the third quarter, its tax rate was 24.6%, compared to 32% the year before. For the first three quarters of the year, the rate was 27.9%, compared to 32.3% in the year-ago period.

Margin %

08/05

12/05

03/06

06/06

09/06

Gross

25.8

26.4

26.9

27.7

28.0

Op.

5.3

6.0

6.8

7.6

8.4

Net

3.3

4.1

4.7

4.9

5.3
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:
Except for its first quarter this year, HB Fuller has successfully confounded analysts' profit predictions. While it's possible the company will do so again this time, it seems the analysts have decided to stick close to the adhesive-maker's forecasts, assigning a target that's right in the middle of management's guidance of $0.45 to $0.47 per share.

Early this year, the stock was trading around $28 per share. It got sunk during the summer, falling all the way to roughly $18 a stub. It's since recovered almost all that lost ground, giving the glue-and-goo maker a P/E ratio of 19 and a price-to-sales ratio of about 1. In other words, this stock looks fairly priced. So while analysts have painted HB Fuller with a "buy" recommendation, they might end up surprised once again when it fails to meet expectations. That, of course, would be the time to stir some of its shares into your portfolio.

Competitors:

  • Imperial Chemical Industries (NYSE:ICI)
  • Huntsman (NYSE:HUN)
  • PPG Industries (NYSE:PPG)

Related Foolishness:

PPG Industries is a recommendation of Motley Fool Income Investor, where lead analyst James Early is sticking it to the market by seven percentage points. See all his dividend-paying picks with a free 30-day guest pass.

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Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.