Beep! Beep! Beep! What's that sound? It's RV king Winnebago (NYSE:WGO), and it's backing in with a load of earnings news for fiscal Q2 2006. When it opens its doors tomorrow morning, will we like what's inside? Here's what you need to know to decide for yourself.

Wall Street Wisdom:

  • General consensus. Six analysts follow Winnebago, with four of them calling the stock a buy and two more saying hold.
  • Revenues. Quarterly sales are expected to fall 5.5% versus this time last year. $226.2 million is the target.
  • Earnings. Profits are expected to rise by a penny, to $0.38 per share.

Margin watch:
High raw-material and energy costs continue to squeeze Winnebago's gross margins, which have fallen steadily over the past 18 months. Operating margins have fallen in tandem, losing 120 basis points over the past year and a half. Lower taxes and higher interest from the company's $136 million cash hoard, however, have stepped in to pick up the slack, holding Winnebago's net margin steady with its August 2004 level.

Margins

8/04

11/04

2/05

5/05

8/05

11/05

Gross

14.6%

14.5%

14.3%

14%

13.8%

13.4%

Op.

10.6%

10.6%

10.3%

10%

9.9%

9.4%

Net

6.3%

6.4%

6.3%

6.6%

6.6%

6.3%

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:
With sales numbers expected to fall tomorrow, you might think analysts would be more pessimistic on Winnebago than they actually are. But remember that last quarter, sales declined nearly 18% -- so a 6% decline is actually a good thing. It might mean the company is nearing that "turning the corner" moment when sales begin to rise once more.

Also, keep in mind that whatever its sales numbers might be, Winnebago is generating more cash now than it was a year ago. Over the last 12 months, the company churned out $73.6 million in free cash flow, an 18% improvement over the year-ago period's $62.5 million. That gives Winnebago a bargain valuation of 14 times trailing free cash flow and 17 times trailing earnings -- not bad for a company expected to grow its profits at 15% per year over the next five years.

Competitors:
We covered the whole industry, basically, in Trailer Park Treasures last year. But for those who missed it, Winnebago competes with companies such as Thor (NYSE:THO), Fleetwood (NYSE:FLE), Champion (NYSE:CHB), Monaco (NYSE:MNC), Palm Harbor (NASDAQ:PHHM), and Coachmen (NYSE:COA).

Fool contributor Rich Smith has no interest, short or long, in any company named above.