When is a surprise not a surprise? When it already happened more than a month ago.

That will likely be the case with Internet and catalog retailer Sportsman's Guide (NASDAQ:SGDE) when it reports Q4 and full-year 2005 earnings tomorrow. Way back in January, the company announced that its quarterly earnings would exceed analyst estimates. You'd think that all that remains to be learned tomorrow is by how much. But here in Fooldom, we think there are a few other things worth noting as well.

Wall Street Wisdom:

  • General consensus. Three analysts follow Sportsman's Guide, with two of them rating the stock a buy and one a hold.
  • Revenues. Analysts expect the Guide to report a 3% increase in sales year over year, to $95 million.
  • Earnings. Profits are predicted to decline 7% to $0.53 per share.

Margin watch:
The Guide's gross margins have been under pressure for a while now, but as the company continues to shift its business model away from paper catalogs and toward Internet sales, more profits are nonetheless dropping to the bottom line. Both rolling operating and net profit margins have been on the rise for the past year.

Margins %

6/04

9/04

12/04

3/05

6/05

9/05

Gross

33

32.6

32

31.7

31.4

31.8

Op.

5.6

5.8

5.3

5.5

5.7

6.1

Net

3.6

3.7

3.3

3.4

3.5

3.8

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:
So with profit margins up and sales also rising, why are profits expected to decline? You're right -- that's a trick question, because they're not. The company split its shares 3-for-2 last April, and as a result, historical numbers for earnings per share are a bit out of whack on certain financial data sites. Once you adjust for the split, the Guide actually earned just $0.46 a year ago. So if it hits analyst targets of $0.53 tomorrow, that will make for a 15% jump in per-share profits. If the Guide hits the upper end of its own guidance ($0.54), we've got a 17% increase on our hands. Nice.

And now the bad news: Mr. Market has had more than a month to chew over January's guidance and has bid the company's shares up 14% in response. Can the stock go higher tomorrow? That will depend on two things: First, did the market underestimate how greatly the Guide intends to beat last year's numbers? And can management refrain from stealing its own thunder by scaring analysts with its guidance for 2006? Tune in tomorrow to learn the answers to both.

Fool contributorRich Smithdoes not own shares of Sportsman's Guide.