With the weekend ahead of us and the markets closed for Memorial Day on Monday, today our Forecast looks four days into the future. Grocer Albertsons (NYSE:ABS) reports Q1 2006 earnings results Tuesday.

What analysts say:

  • Buy, sell, or waffle? Eleven analysts follow Albertsons. Six rate the stock a hold, and the other five a sell.
  • Revenues. Analysts will be looking for less than a 1% rise in quarterly sales to $10.5 billion.
  • Earnings. Profits are expected to decline 14% decline to $0.25 per share.

What management says:
None of which has much bearing on why anyone would invest in Albertsons today, of course. As CEO Larry Johnston pointed out in the March fiscal 2005 earnings conference call, Albertsons has already agreed to sell itself "to a consortium of investors including SUPERVALU (NYSE:SVU), CVS (NYSE:CVS), and a Cerberus-led investment group." The impending sale means that Albertsons share price will vary much more with the likelihood that the deal will go through, or be replaced with a higher offer from (an)other buyer(s).

In that regard, Johnston reminded investors "that this deal is not yet complete, and is subject to customary closing conditions including both regulatory and shareholder approval." That said, Albertson's board has recommended that shareholders approve the deal, and management expects it will close in mid-2006.

What management does:
Simplifying matters for investors, there's really very little need to focus on anything but the likelihood of the buyout going through -- because there's almost nothing else happening at this business other than the buyout. As I've already mentioned, sales are expected to be just about flat. Rolling operating and net margins haven't swung more than 10 basis points up or down in over a year, and rolling gross margins have been stuck at precisely the same level 28% level for the last 15 months.

Margins %

10/04

2/05

5/05

8/05

11/05

2/06

Gross

28.1

28

28

28

28

28

Op.

3

3.2

3.2

3.1

3.1

3.2

Net

1

1.1

1.2

1.2

1.2

1.1
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:
So about the buyout -- is it a good deal for shareholders? My fellow Fool, Tim Beyers, thinks so. Writing in the wake of the buyout announcement back in January, Tim pointed out that the cash and SUPERVALU stock deal was worth $26.29 per share when announced, or about 9% more than Albertsons shares were fetching just prior to the announcement. SUPERVALU's stock isn't worth as much today as it was then, but the buyout is still worth about $25.81 per share today.

With the company's sales stagnant, its profitability stuck in neutral, and its share price plateaued, Albertsons shareholders now face the choice of (a) accepting the bid or (b) jumping off the plateau and in all likelihood, watching their shares fall back down to $22. My hunch: They'll opt for the former.

Competitors:

  • Kroger (NYSE:KR)
  • Pathmark (NASDAQ:PTMK)
  • Walgreen (NYSE:WAG)
  • Wal-Mart (NYSE:WMT)

Wal-Mart is a Motley Fool Inside Value recommendation. Take the newsletter dedicated to getting top-shelf stocks at bargain-basement prices for a 30-day free spin.

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