Now that Christmas is over, it's time for that other "most wonderful time of the year" -- year-end earnings season, when those companies whose fiscal years align sensibly with the calendar version report their Q4 and full-year results. Next up is ChoicePoint (NYSE:CPS), which reports bright and early Wednesday morning.

What analysts say:

  • Buy, sell, or waffle? Eighteen analysts follow ChoicePoint, poetically splitting their votes 7/11, buy versus hold.
  • Revenues. On average, they think sales fell 3% versus last year, to $251.4 million.
  • Earnings. Profits are predicted to be down 22% to $0.39 per share.

What management says:
In November, ChoicePoint encountered an obstacle to its plan to sell off business units comprising 15% of its workforce, 14% of annual revenues, and 6% of operating profits. In a press release filed with the SEC, the firm announced that it has been unable to find a buyer willing to pay "a fair market price" for its ChoicePoint Precision Marketing direct marketing subsidiary, and is suspending the sales process there.

No word yet on how the planned sales of The Bode Technology Group (forensic DNA analysis), and EquiSearch (shareholder services) are progressing, but in September, the firm did announce the "successful" sale of its Priority Data Systems unit for a $3 million to $4 million loss.

What management does:
Even as ChoicePoint begins to turn itself around on an operational level, its net margins took a hit last quarter. By recording restructuring and impairment charges for the businesses it's trying to sell off, the firm wrecked not just its quarterly result but also the rolling net margin. That damage will continue to be felt on the table below for three more quarters, including Wednesday's.

Margins %

6/05

9/05

12/05

3/06

6/06

9/06

Gross

48.9

49.9

46.3

46.3

46.0

46.4

Op.

27.4

27.4

25.1

25.0

24.8

25.1

Net

16.5

16.6

13.3

12.6

12.2

1.9
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:
Is it worth the damage? I'd still say so. While the firm's net results will suffer in the short term, this is a case of "no pain, no gain." As noted above, the businesses ChoicePoint intends to shed are not pulling their weight within the consolidated corporation. If they produce only 6% of operating profits on 14% of revenues, then you can crudely say these units have lower margins than the rest of ChoicePoint. Then, as a slimmer business, better able to focus on its most profitable activities, ChoicePoint should emerge from this restructuring a stronger company and a better investment.

Assuming it can find someone on whom to pawn off the underperforming business, that is.

Competitors:

  • Acxiom (NASDAQ:ACXM)
  • Automatic Data Processing (NYSE:ADP)
  • Computer Sciences
  • Dun & Bradstreet (NYSE:DNB)
  • First Advantage
  • Harte-Hanks (NYSE:HHS)

"ChoicePoint" -- why does that name sound familiar to you even if you don't own the company? Here's why:

Fool contributor Rich Smith does not own shares of any company named above.