Four times each year, investors get the chance to hear about the progress of their companies. Miss one round of earnings news, and usually it's no worries -- another one will get you back up to speed in three months. But for investors in data collator ChoicePoint (NYSE:CPS), tomorrow's newsflash is one you won't want to miss. Big changes are afoot, making the news of how many pennies the company earned in Q2 2006 fade to insignificance.

What analysts say:

  • Buy, sell, or waffle? First off, there are 18 analysts following ChoicePoint. Ten say "buy"; eight say "hold."
  • Revenues. Sales are expected to be up 3% versus last year, to $266.6 million.
  • Earnings. Analysts think profits grew just 2%, to $0.45 per share.

What management says:
And now for the important stuff. Earlier this month, ChoicePoint announced a major restructuring to focus the business on "helping customers manage economic or physical risks" -- and not incidentally, according to CEO Derek Smith, emphasizing divisions with the "greatest growth potential." In consequence, the firm aims to divest itself of three units that don't fit well within the new business plan: ChoicePoint Precision Marketing (direct marketing), The Bode Technology Group (forensic DNA analysis), and EquiSearch (shareholder services).

In other news, ChoicePoint recently announced its purchase of two new businesses that presumably fit better with its new objectives: ePolicy, which provides "administration solutions" to insurance companies; and Insuratec, a "provider of lien holder and mortgagee notification services to the Property and Casualty Insurance industry." Although ChoicePoint made it clear that neither acquisition would materially affect its financial results in the coming quarter, these two purchases do suggest that ChoicePoint's new business objectives will be increasingly tied to serving the insurance industry.

What management does:
Without commentary, here are how the pre-realignment firm's margins have been trending:

Margins %

12/04

3/05

6/05

9/05

12/05

3/06

Gross

46.4

47.3

46.9

46.7

46.3

46.3

Op.

26.3

26.4

26.1

25.6

25.1

25

Net

16.1

15.8

15.2

14.7

13.3

12.6
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:
Combined, the units to be divested make up 15% of ChoicePoint's workforce. In 2005, they contributed $146 million worth of revenues to the company, and $16.7 million in operating profits. Considering that the firm as a whole took in $1.06 billion in revenue and generated $266 million in operating profits, it looks to this Fool like the units being divested are less than half as profitable as ChoicePoint in total.

At the risk of sounding harsh, my initial assessment of ChoicePoint's move is that it's shedding dead weight that has been dragging down firm profitability. Post-realignment, ChoicePoint will be a leaner, more profitable company, and if CEO Smith's assessment can be trusted, a faster grower as well.

Competitors:

  • Acxiom (NASDAQ:ACXM)
  • Automatic Data Processing (NYSE:ADP)
  • Computer Sciences (NYSE:CSC)
  • Dun & Bradstreet (NYSE:DNB)
  • First Advantage (NASDAQ:FADV)
  • Harte-Hanks (NYSE:HHS)

"ChoicePoint." Why does that name sound familiar even if you don't own the company? Here's why:

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