Judging from the calendar, most of us are barely halfway through the year 2006. Deep in the heart of Texas, though, manufactured housing builder Palm Harbor (NASDAQ:PHHM) has already called this year a wrap and moved on to 2007. The company completed its first quarter of fiscal 2007 last month, and plans to tell us how it went tomorrow afternoon.

What analysts say:

  • Buy, sell, or waffle? Just two analysts follow Palm Harbor. One says "buy," the other, "hold."
  • Revenues. Analysts project $204.4 million in sales for the quarter, a year over year increase of 23%.
  • Earnings. Profits are predicted to rise 42% to $0.17 per share.

What management says:
Reporting on last quarter's results, CEO Larry Keener noted that Palm Harbor had achieved its earlier promises of growing sales and maintaining profitability. Which is nice to hear -- we do like to see our companies grow, and profits are nice to have as well. Even better news, though, came in the manner in which Palm Harbor cleared these hurdles. In particular, Keener noted that the firm increased its market share, and shifted its product mix towards higher-margin modular homes and away from lower-margin "manufactured housing" (i.e. trailers).

What management does:
The company's detailed description of what it has been selling, and for how much, backs up Keener's assertions. Modular-home sales increased 23% last quarter. That's twice the growth exhibited in the firm's sales of manufactured housing; what's more, the average retail sales price on Palm Harbor's modular homes is roughly twice that of manufactured housing.

That's all done wonders for the firm's margins. Rolling gross margins remained greater than 26% for the second quarter in a row, and the operating and net losses of 18 months ago are but a distant memory.

Margins %

12/04

3/05

6/05

9/05

12/05

3/06

Gross

25.3%

25.8%

25.7%

25.6%

26.6%

26.1%

Op.

(1.3%)

0.6%

0.8%

1.6%

4.1%

3.5%

Net

(1.5%)

(0.6%)

(0.4%)

0.2%

1.5%

1.6%

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:
Reviewing last quarter's results, fellow Fool Rick Munarrizpointed out one of the hazards of investing in small, underfollowed companies like Palm Harbor. Specifically, that those earnings estimates on the firms can vary widely, and one lone loon can greatly skew the "consensus" guesstimate by going too far out on a limb. That's what happened last quarter, when Palm Harbor "missed" a consensus estimate that was distorted by one analyst predicting profits twice those expected by his counterparts.

Missing that estimate helped to depress Palm Harbor's stock toward its current price, nearly 20% lower than in late May. But if Palm Harbor keeps on performing as it has been, you just might want to send last quarter's overoptimistic analyst a thank-you card for helping to bring about the discounted price.

Competitors

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