Mmm. The sound of coffee softly percolating and the aroma of flapjacks on the grill are beginning to waft across Wall Street today. You know what that means, Fools -- IHOP's earnings order is up. The pancake king reports its Q4 and full-year 2005 numbers bright and early tomorrow morning.

Wall Street Wisdom:

  • General consensus. Only half a dozen analysts follow IHOP. Four of them rate the stock a hold; the other two vote buy.
  • Revenues. Wall Street is looking for IHOP to report a 6% decline in quarterly sales to $88.7 million.
  • Earnings. Profits are headed the other way, it seems. Analysts predict $0.51 per share, for a 4% year-over-year increase.

Margin watch:
IHOP has a three-prong plan for improving its business: "Energize the Brand, Improve Operations Performance, and Maximize Franchise Development." Judging from the chart below, the plan is working well. Rolling gross margins have improved nearly 800 basis points in the past 18 months, with most of that improvement passing through to operating profits. Meanwhile, sizeable restructuring charges taken in 2004 did not reappear in 2005, giving the rolling net margin an extra boost.

Margins %

6/04

9/04

12/04

3/05

6/05

9/05

Gross

36.1

36.1

41.9

42.8

43.9

44.0

Op.

21.5

19.9

25.3

25.3

26.6

27.2

Net

9.1

8.6

9.3

9.2

11.5

12.5

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 lookout:
The good news doesn't look likely to stop there, either. IHOP has increased its earnings guidance twice in the past three months, first promising about $2.18 per share (for the year) back in October and then upping that to about $2.30 late last month. IHOP has already booked $1.71 worth of diluted profits per share in the first three quarters of 2005. Thus, it seems we should be on the lookout for about $0.59 per share tomorrow. As for why analysts are still predicting $0.51, I admit I'm at a loss.

Competitors:
IHOP's publicly traded competitors include Applebee's (NASDAQ:APPB) and Denny's (NASDAQ:DENN).

Fool contributorRich Smithdoes not own shares of any company named above.