Tomorrow, Audible (NASDAQ:ADBL) will announce earnings for the first quarter of 2006. The provider of downloadable spoken-word content disappointed many investors last year by insisting upon reinvesting in the business and then goofing on its updated website launch last December. Read on to see what expectations are now.

What analysts say:

  • Buy, sell, or waffle? Three say buy or strong buy, one says sell, and six say curl up with an audiobook while holding the shares.
  • Revenues. Consensus is for $19.28 million, a 49.3% jump from a year ago. That new website should still be drawing 'em in.
  • Earnings. Last quarter, a loss of $0.11 per share was expected, and the company came in ahead with only (!) a $0.09 EPS loss. This quarter, analysts expect a $0.04 EPS loss. We'll see.

What management says:
In announcing earnings for 2005, Donald Katz, chairman and CEO, said, "The fourth quarter was a major milestone for Audible, as we launched a new website and new membership plans that we consider key to our future growth and success. The site, however, launched considerably later than planned, and this impeded new customer acquisitions and revenue and, in turn, our gross profit. The most important factor contributing to the loss was higher-than-anticipated marketing and operating expenses incurred during the quarter.

"The good news is that we saw significantly lower churn rate for the quarter versus the third quarter and record traffic and sales at the end of December as the new Web site began to perform. This has continued into early January. We believe this momentum and our recently launched growth initiatives have us poised for success in 2006 and for many years to come."

What management does:
Consistently high gross margins are extremely promising, but they're also frustrating, given the company's inconsistent operating and net margins. High year-over-year sales growth shows the promise of the product, but the company still awaits consistent positive earnings.

Margins %*

9/04

12/04

3/05

6/05

9/05

12/05

Gross

59.8

58.3

58.3

59.1

59.3

57.2

Operating

1.9

3.1

3.9

3.8

0.9

(5.5)

Net

(47.3)

(24.7)

7.1

7.2

5

(1)

Sales Growth %**

--

75.1

90.5

89.7

80.7

79
*Trailing-12-month data for quarter ending in month indicated.
**Year-over-year comparison for quarter ending in month indicated.
All data from relevant company 10-Q and 10-K filings.

One Fool says:
Reinvestment in infrastructure, new foreign websites, redesign of the domestic website, and other projects, while most likely good for the longer-term growth of the company, have disappointed the shorter-term view of most investors.

If the majority of infrastructure and new-product reinvestment is over, at least for now, then the stock could rise rapidly. But if management again disappoints investors and Wall Street analysts, look for another downturn.

Competitors:

  • Apple (NASDAQ:APPL)
  • MediaBay (NASDAQ:MBAY)
  • Barnes & Noble (NYSE:BKS)
  • Borders Group (NYSE:BGP)

Fool contributor Jim Mueller owns shares of Audible but of no other company mentioned. The Motley Fool has a disclosure policy.