Once more, Independence Day has come and gone. And once more, it's time to check in on things at the world's most patriotic commode manufacturer. That's right, folks. Tomorrow's the day we get the Foolish skinny on American Standard's (NYSE:ASD) Q2 2006 results.

What analysts say:

  • Buy, sell, or waffle? American Standard has lost two analysts over the past three months. Of the 16 remaining, only four still rate the stock a buy; 10 say hold, and two counsel selling.
  • Revenues. Like last quarter, the analysts expect American Standard to report 6% year-over-year growth in sales, and once more, the magic number will be $2.5 billion.
  • Earnings. Undeterred by being proved wrong last quarter, analysts once again posit a 15% fall in quarterly profits and predict, on average, that American Standard will earn $0.40 per share.

What management says:
American Standard really hasn't said much of interest -- at least not in anything it's filed with the SEC for public review -- since last reporting earnings back in April. Rather than go into the old news in detail, I'll refer you to the write-up I did back then. You can read whole story, but here's the short version: Last quarter, the company grew sales about 50% faster than Wall Street was expecting, generating several more pennies of profit per share than, well, Wall Street was expecting. Although American Standard is perhaps best known for its kitchen and bath fixtures, that division actually turned in the weakest results. The air-conditioning division did best of all, with the company's new emphasis on a whole-house air-purifying system helping to supercharge both sales and profits.

What management does:
Gross margins have been more or less stagnant for quite some time. Farther down the income statement, however, things look a bit better, with rolling operating and net margins both trending in the right direction.

Margins %

9/04

12/04

3/05

6/05

9/05

12/05

Gross

26.9

26.7

27.0

27.0

27.1

27.0

Op.

9.2

9.0

9.2

9.2

9.5

9.4

Net

3.3

3.7

4.1

4.0

5.4

4.9
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.

One Fool says:
As a Foolish investor, one of the things I find most appealing at American Standard is its quality of earnings. At last report, analysts were predicting about $550 million in net profits under generally accepted accounting principles this year. Impressive as that number looks, it's surpassed by the company's own assertion that free cash flow will reach $600 million for the year. Key to these cash profits outstripping their GAAP cousins is superb management of working capital. Over the past six months, sales have grown by a respectable 9%, while inventories have sold down by 2%.

More goods going out the door -- while fewer goods sit on shelves collecting dust -- means more profits pouring more quickly into investors' coffers. That's what I call a standard for success.

Competitors:

  • United Technologies (NYSE:UTX)
  • Crane (NYSE:CR)
  • Honeywell (NYSE:HON)
  • Lennox (NYSE:LII)
  • Johnson Controls (NYSE:JCI)
  • Jacuzzi (NYSE:JJZ)

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