Now that Christmas is out of the way, 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 fourth-quarter and full-year results. Next up is Furniture Brands (NYSE:FBN), which reports on Wednesday.

What analysts say:

  • Buy, sell, or waffle? Seven analysts still follow Furniture Brands. One says "buy it," one says "sell it," and the rest say "hold."
  • Revenues. On average, they're looking for a 5% sales decline to $561.9 million.
  • Earnings. ... but a staggering 86% decline in profits, to just $0.05 per share.

What management says:
Before Wednesday's news rolls around, you should know about a couple of press releases Furniture Brands put out this quarter. First, the firm joined furniture-making peers and twin Motley Fool Hidden Gems picks Stanley (NASDAQ:STLY) and Hooker (NASDAQ:HOFT) in downsizing its workforce. You can get all the details on the closure of Furniture Brands' Broyhill factory in Lenoir, N.C., right here.

In more numerical news, Furniture Brands issued an earnings warning early last month, advising that its Q4 sales will likely decline in the "mid-single digits" in Wednesday's news, and that it will report a net loss between $0.02 to $0.06 per share.

(Speaking of which, once again, we're seeing analyst estimates based on pro forma numbers. In predicting the $0.05-per-share profit you see above, Wall Street is giving Furniture Brands a pass on $0.09 worth of charges for "increased interest expense" that was due to some gains on interest rate swaps and restructuring costs related to closing the Lenoir plant. Put those charges back into the mix, and Wall Street's prediction is in the range of the company's own: about a $0.04-per-share loss.)

What management does:
That said, Furniture Brands hasn't been doing too badly on the margins front in recent quarters. Rolling gross margins have held steady for four straight quarters, rolling operating margins are hardly bobbling, and rolling net margins today are actually higher than they were one year ago.

Margins

6/05

9/05

12/05

3/06

6/06

9/06

Gross

22.3%

21.5%

22.9%

22.9%

22.9%

22.9%

Operating

6.0%

5.5%

5.1%

4.9%

5.0%

5.0%

Net

3.2%

2.8%

2.6%

2.8%

3.1%

2.9%
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:
Don't expect this good news to be repeated on Wednesday, however. In the same press release in which Furniture Brands knocked back its earnings forecasts, the firm noted that it has been "discounting aggressively on selected slow-moving products," and "taking downtime in several domestic manufacturing facilities" this quarter.

With average inventories in the last two quarters standing 15% higher than they stood at the same points in time the previous year -- a growth rate 10 times the firm's 1.5% sales growth during the same period -- Furniture Brands' decision to discount its products was probably necessary. That said, it's almost certain to hurt the firm's gross margins. Add to this the production inefficiencies attendant on reducing production (again, probably targeted at reducing unsold inventories of goods), which will weigh on operating margins, and Furniture Brands' net profitability could look ugly indeed come Wednesday.

Competitors:

  • Bassett Furniture (NASDAQ:BSET)
  • Ethan Allen (NYSE:ETH)
  • Haverty Furniture (NYSE:HVT)
  • La-Z-Boy (NYSE:LZB)

What did we expect out of Furniture Brands last quarter, and what did it produce? Find out in:

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