Foolish Forecast: Viewing 1-800 CONTACTS

People say that hindsight is 20-20. Unfortunately, that's no help to shareholders of 1-800 CONTACTS (NASDAQ:CTAC), who would probably rather forget their past experiences with this stock. It's been five quarters now since the company last met, much less beat, analyst expectations. Then again, considering how low those expectations have been set for tomorrow's report on Q4 and full-year 2005, it just might turn out to be 1-800 CONTACTS investors' lucky day.

Wall Street Wisdom:

• General consensus. One analyst follows the stock. One analyst says sell it.
• Revenues. According to Yahoo! Finance, no analysts have published revenue estimates for the company. 1-800 CONTACTS booked $54 million in sales in the year-ago quarter, and its guidance of four months ago called for a sales decline to $50 million to $51 million in Q4.
• Earnings. Again, Yahoo! has no published estimates on the company. Earnings.com says the expectation is for breakeven results for the quarter ($0.00 profits); Capital IQ says the estimate for the year is a loss of $0.03 per share.

Margin watch:
All the above looks rather depressing, so let's take a different view of the company. According to the chart below, 1-800 CONTACTS' margins have recently been looking quite a bit stronger than they were 12-18 months ago. Although the gross number has barely budged, both operating and net margins are back in positive territory on a rolling basis (considering not just the quarter named, but also the three quarters previous to it.)

Foolish lookout:
According to 1-800 CONTACTS, though, all of the above numbers pale in significance to the real reason that the company is still only marginally profitable: optometrists prescribing lenses tied to a specific manufacturer -- who only sells them via the optometrist. In its last earnings report, 1-800 CONTACTS devoted two pages of text to describing its numbers -- and four pages to describing the problem of "doctor's lenses," and how it remains unresolved.

Absent news that the legislative situation has changed in the past four months, I suspect that tomorrow's results will look a lot like the numbers shown above.

Competitors:
To lesser and greater extents, 1-800 CONTACTS competes with drugstore.com (NASDAQ:DSCM) and National Vision (AMEX:NVI) on the small side, and Wal-Mart (NYSE:WMT), Motley Fool Stock Advisor pick Costco (NASDAQ:COST), and BJ's (NYSE:BJ) on the large side.

Fool contributor Rich Smith does not own shares in any company named above.