RV and manufactured homes parts supplier Drew Industries (NYSE:DW) reports its fiscal Q2 2006 numbers tomorrow afternoon. Let's sketch out a picture of where the company stands, heading into the announcement.

What analysts say:

  • Buy, sell, or waffle? Three analysts follow Drew, but sentiment has reversed since last quarter. Holds now outnumber buys 2-to-1.
  • Revenues. And yet growth continues apace. Analysts estimate sales grew 22% to $198.6 million in the quarter.
  • Earnings. Likewise with profits. Estimates call for 22% growth to $0.50 per share.

What management says:
Drew's on a bit of a buying spree of late. Its latest target: Happijac, a maker of bed lift systems for RVs. If you're a Hidden Gems member, you can read all about the transaction in Bill Barker's Hidden Gems Daily write-up from June 19. But in case you're not, here's the dime-tour: Drew paid 2.5 times Happijac's fiscal 2005 sales to make this buy. That's a significant premium to the 0.7 times sales that Drew's own shares now fetch, making this purchase look a bit pricey even at the stated price of just $29.5 million.

Drew says the acquisition will be "immediately accretive to Drew's earnings." Which is all well and good -- we're just worried that the firm may have paid too high a price to bring those earnings in-house. We'll be watching, though, and hoping to be proven wrong on this one.

What management does:
Drew has a good record on making smart buys and turning them into smart-looking profits, after all. Over the last 18 months, the rolling tallies of each of its gross, operating, and net margins have continued to march upwards.

Margins %

12/04

3/05

6/05

9/05

12/05

3/06

Gross

22.0

21.7

21.8

21.9

22.5

22.3

Op.

8.3

7.8

7.7

7.9

8.7

9.1

Net

4.7

4.3

4.2

4.5

5.0

5.3

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:
Finally, I'd be remiss if I failed to point out that Drew's management is both smart itself and driven to make smart choices for its shareholders. As Tom Gardner, Fool co-founder and the man who picked Drew for our Hidden Gems portfolio, put it: "CEO [Leigh Abrams]. is a man with a consuming passion to optimize the returns for common-stock shareholders. He stands alongside a CFO [Fredric Zinn] with the highest level of integrity."

With results like those shown above, managed as described above to promote the interests of outside shareholders such as ourselves, Drew's shareholders can rest easy. There will be bumps along the road, sure, and tomorrow might even be one of them. As we near the end of the latest cycle of increased sales of RV and MH parts to the fulfillers of FEMA contracts, there's always the chance that Wall Street's optimism has outlasted reality. Regardless, Drew's the kind of stand-up company we intend to ride for the long haul.

Customers:

  • Cavalier (AMEX:CAV)
  • Champion (NYSE:CHB)
  • Berkshire Hathaway (NYSE:BRK-A)
  • Fleetwoood (NYSE:FLE)
  • Skyline (NYSE:SKY)
  • Thor (NYSE:THO)

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