Rarely has a company dropped as heavy a hint about the contents of an upcoming earnings release as did manufactured homes parts supplier Drew Industries (NYSE:DW) last month. In all honesty, this Motley Fool Hidden Gems pick might as well have just come out and revised its guidance upward instead of saying what it did: that the reason for its releasing earnings a week later than usual was "due to a delay resulting from an increase in orders and elevated production levels related to the recent Gulf Coast hurricanes."
So, um, gee, guys. Is business good or what?
Analysts are eschewing the "or what" scenario and leaning heavily toward the "business is good" theory in making their estimates of what news Drew will report Wednesday afternoon. Of the three analysts surveyed by Thomson First Call, the consensus is that Drew will report $171 million in Q3 revenues, and $0.41 per diluted share in profits. If correct, that would equate to roughly 15% year-over-year growth on both the top and bottom lines.
The reason that business is booming for Drew, the reason alluded to in its October press release setting the earnings release date, is that many of Drew's customers are being swamped with orders from a Federal Emergency Management Agency (FEMA) desperate to find shelter for the thousands of people displaced by Hurricanes Katrina, Rita, and Wilma. As we discussed in "Trailer Park Treasures" back in September, towable RV and manufactured home companies such as Monaco Coach (NYSE:MNC), Champion Enterprises (NYSE:CHB), Thor Industries (NYSE:THO), and Fleetwood (NYSE:FLE) have announced combined orders for more than 25,000 such homes over the last two months. And with Drew selling parts to essentially every company in this industry, it stands to benefit from each order that any of its customers lands from FEMA.
There are, however, challenges to be overcome in capitalizing on this rush of new business. Drew may have to hire additional employees, may be unable to negotiate the best prices from raw materials suppliers due to time pressures, or may simply fail to work as efficiently when pressed for time as it does at a more normal pace. Bearing in mind that Wednesday's report will incorporate only one month's worth of post-Katrina results, we'll still want to keep a careful eye on the prose portion of the earnings release for any further hints that Drew gives as to how well it's handling the additional work flow.
For more RV-related Foolishness, read:
- Superstars or Scoundrels?
- Drew Insiders Cash In, Cash Out
- Champion's Comeback Story
- Drew Builds Momentum
- Is Winnebago Still Rolling?
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Fool contributor Rich Smith does not own shares in any of the companies mentioned in this article.
