Cat people, dog people, investors of all stripes: Once again, it's time to check in on an investment that can appeal to the pet lover in all of us. Oil-Dri (NYSE:ODC), the largest manufacturer of kitty litter in the country, reports its fiscal Q1 2007 earnings on Tuesday.

What analysts say:

  • Buy, sell, or waffle? Exactly zero analysts are following Oil-Dri, giving attentive Fools a great opportunity to spot a bargain -- if a bargain it is.
  • Revenues and earnings. No analysts means no estimates for either revenues or earnings. Natch.

What management says:
As fellow Fool Nathan Parmelee described last quarter, Oil-Dri had a bit of a rough year in fiscal 2006. Between its $0.09 charge to earnings for repatriating foreign-earned profits under the 2004 Homeland Investment Act (which grants U.S. companies a favorable tax rate in return for bringing foreign profits back to the U.S.), and energy costs that, although retreating, are still far above historical norms, profits plunged 13% even as sales rose a healthy 9%. To mitigate the energy costs, at least, Oil-Dri announced in October plans that it will once again be raising prices and will "continue fuel surcharges for fiscal 2007." Although the price increases are only expected to "partially recover these increased [energy] costs," this Fool suspects that unless they are rolled back when energy prices begin to fall once more, they hold the potential for giving Oil-Dri's profitability a real boost in quarters to come.

In other October news, Wade R. Bradley, president of the company's Retail and Wholesale Products Group, departed Oil-Dri last month to take over the CEO's job at an over-the-counter-traded company called Electric Aquagenics.

What management does:
The song remains the same here. All year long, Oil-Dri's gross, operating, and net margins have continued to wane. Last quarter, however, operating improvements may have begun to turn the corner at the operating and net margin levels. The firm managed to drive down selling, general, and administrative costs even as sales (and their cost) continued to climb.

Margins %

4/05

7/05

10/05

1/06

4/06

7/06

Gross

22.0

21.5

20.4

19.4

19.2

18.6

Op.

5.5

5.3

4.7

4.5

4.2

4.2

Net

2.8

3.5

3.3

3.1

2.6

2.6
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:
One final thing to worry about (as if margin compression weren't enough) can be found on the balance sheet. Over there, despite the firm's holding accounts receivable growth to no more than the 10% rate of sales growth we've seen over the past six months, average inventories rocketed ahead 21%. That hasn't hurt free cash flow yet (which held steady at $4 million for the fiscal second half, just as it was in fiscal 2005), but if Oil-Dri continues to let inventories grow unchecked, they're eventually going to start soaking up the cash profits. We'll check in on this next week.

Competitors:

  • Amcol International (NYSE:ACO)
  • Church & Dwight (NYSE:CHD)

Wall Street may not be watching, but you know we are. Read more about Oil-Dri in:

And give us your two cents' worth on Oil-Dri at Motley Fool CAPS, our new stock-rating community that you can join for free.

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