Timber harvester Weyerhaeuser (NYSE:WY) reports its Q4 and full-year 2005 earnings results tomorrow, and investors are nervous. Rightly so. When Weyerhaeuser beats analyst estimates, it usually does so by a large margin, but its misses are pretty sizable, too. Which way will it go tomorrow? Let's have a look at the numbers and see what they tell us.

Wall Street Wisdom:

  • General consensus. Nineteen analysts follow Weyerhaeuser, with 10 voting hold, seven buy, and two sell.
  • Revenues. The analysts are calling for a 3% decline in Weyerhaeuser's revenues tomorrow, to $5.7 billion.
  • Earnings. Profits are believed to have declined 30% in Q4, to $0.75 per share.

Margin watch:
Monitoring a firm's rolling, or trailing-12-month, margins can be especially valuable when evaluating a company like Weyerhaeuser. When a firm's quarterly results jump around as much as this one's do, the only way to make sense of it all is to take the long view -- which is precisely what the rolling margin watch aims to give you.

Margins %

6/04

9/04

12/04

3/05

6/05

9/05

Gross

24.0

25.0

24.9

25.1

24.4

23.5

Op.

9.1

10.4

10.8

11.3

10.7

9.4

Net

3.2

5.5

5.7

6.0

6.2

4.9
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

Foolish forensics:
Weyerhaeuser's income statements are a patchwork of "one-time" charges. Mostly, they take the form of one-time gains on sales of assets (buy some land for $10, sell it 50 years later for $100, and you'll book a gain on the sale) and charges for restructurings and asset write-downs. Tomorrow, for example, we should see Weyerhaeuser book a $0.10 loss for settlement of some antitrust litigation, an asset impairment charge for perhaps another dime, and an unspecified restructuring charge for shutting down a containerboard machine, among other "many-time" items.

These many-time items can wreak havoc on an investor's ability to detect a trend. All I can really see here is that, over the past 18 months, gross margins haven't deteriorated a whole lot. Operating margins rose for a while before falling, but on the whole, they're moving upwards. Likewise with net margins -- which is exactly what I'd expect from a firm that makes periodic sales of land at prices in excess of its book value. The more time that goes by, the more the land should appreciate in value -- and the greater the value of the many-time benefits when Weyerhaeuser sells.

Fool contributor Rich Smith does not own shares of Weyerhaeuser.