Set your egg timers and settle in for a good long wait, TurboChef (NASDAQ:OVEN) investors. The little oven maker is still set to "warm" for now, and you'll have to wait until Monday for its Q4 and full-year 2005 earnings results to be fully done. The company reports earnings after the market closes.

Wall Street Wisdom:

  • General consensus. Despite all the attention the company has received on Jim Cramer's show, TurboChef still hasn't attracted much of a following on Wall Street. Only five analysts follow it professionally. Three of them rate the stock a buy, and the other two recommend a hold.
  • Revenues. Analysts expect to hear tomorrow that TurboChef's revenues plunged 65% year over year, cratering at $12.9 million.
  • Earnings. Consequently, profits are believed to have burned to a crisp. Wall Street expects last year's Q4 profit of $0.27 per share to become this quarter's $0.09-per-share loss.

Margin watch:
But wait -- it gets worse when you look at the details. Revenues are evaporating, sure. But that's not always enough to incinerate profits. We also have to worry about the long-term trend of declining margins on the few sales TurboChef did make. Gross margins have been halved during the past 18 months. Operating and net margins, while strong during the end of last year, have both turned negative recently.

Margins %

6/04

9/04

12/04

3/05

6/05

9/05

Gross

50.2

39.2

37.9

37.9

34.7

24.9

Op.

(138.5)

1.4

13.9

14.5

9.3

(10.2)

Net

(338)

(25.6)

13.7

14.5

9.7

(17.1)

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

Foolish forensics:
Meanwhile, over on the balance sheet, we see that TurboChef's inventories climbed 78% year over year in the June quarter, and 75% in the September quarter. That's certainly one thing investors should examine tomorrow: Are inventories continuing to rise as sales decline? If so, things will look bleak for TurboChef.

On the plus side, it's important to remember that one factor in the company's unprofitable turn last quarter was the $6.8 million increase in its warranty reserve. Tomorrow, we'll see whether that was truly a one-time charge, or whether it needs to be repeated this quarter, and perhaps in the future.

Competitors:
TurboChef's two primary publicly traded rivals in oven-making are Illinois Tool Works (NYSE:ITW) and Motley Fool Hidden Gems recommendation Middleby (NASDAQ:MIDD).

Join Tom Gardner and the Motley Fool Hidden Gems team for more delicious small-cap opportunities. Take a bite out of the market with a 30-day free trial.

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