Chaparral Steel (NASDAQ:CHAP), the "second-largest supplier of structural steel products in North America," reports its fiscal first-quarter 2007 earnings after close-of-market on Tuesday. Want to know what Wall Street expects to see? Read on. Want to know what really matters? Read on a bit more.

What analysts say:

  • Buy, sell, or waffle? Chaparral has lost an analyst since last quarter, but the two that remain still rate the stock a buy.
  • Revenues and earnings. Both are staying mum on what they expect for this quarter's revenues, but the average of their earnings estimates is $1.04 per share.

What management says:
Reviewing the company's strong fiscal Q4 2006 results, CEO Tommy Valenta called 2006 "a great year" and pronounced himself "optimistic about this coming year" (fiscal 2007, that is). As we had predicted before the Q4 results came out, a steep sequential decline in natural gas prices decreased energy expenses by 16%, giving this energy-dependent manufacturer another much-needed boost to its profitability. Also, demand for steel remained strong last quarter and into the early months of this quarter (at least), and average selling prices of steel, per ton, were up 7% year over year.

What management does:
After four quarters of declining profitability (on a rolling basis), Chaparral has put together back-to-back "up" quarters, in which rolling gross, operating, and net margins all rose.

Margins %

2/05

5/05

8/05

11/05

2/06

5/06

Gross

18.5

17.1

14.5

14.6

17.5

20.8

Op.

15.8

14.5

12.1

12.1

14.4

17.7

Net

7.8

7

5.8

6.4

8.4

10.7

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Now mind you, the hot early months of Q1 pushed energy demand (and probably average energy costs) back up. But not to fear -- Valenta went out on a limb back in July, and predicted that Q1 "will be the second- or third-best quarter in our company's history." Addressing the issue of fluctuating energy costs, he pointed out that "power costs have been fixed through October, thereby eliminating voluntary outages due to high prices." Moreover, "our products remain competitively priced to imports and we expect that any increases in scrap will be offset by an increase in the raw material surcharge." Looks like we've got a good quarter heading our way, folks.

Competitors:

  • Commercial Metals (NYSE:CMC)
  • Gerdau AmeriSteel (NYSE:GNA)
  • Mittal (NYSE:MT)
  • Nucor (NYSE:NUE)
  • Steel Dynamics (NASDAQ:STLD)

For more Foolish steel fun:

Mittal is a Motley Fool Inside Value recommendation. For more companies to boost your portfolio, check out our Inside Value newsletter free for 30 days.

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy made of steel.