Tic-tac-toe . investors want to know: After putting together back-to-back "earnings misses" in the past two quarters, will recreational-vehicle and manufactured-housing maker Fleetwood (NYSE:FLE) make it three in a row when it reports fiscal Q2 2007 earnings Thursday morning?

What analysts say:

  • Buy, sell, or waffle? Five analysts follow Fleetwood; one rates it a buy, but the others all say "hold."
  • Revenues. On average, they're looking for a 16% decline in sales tomorrow, to $526.9 million.
  • Earnings. Moreover, they expect last year's quarterly profit to give way to a $0.32-per-share loss in Q2.

What management says:
Fleetwood's preliminary sales results for the quarter, released early last month, showed that the company barely edged out analysts' sales expectations by selling $528 million worth of product. Last year's "good" news -- the company's ability to boost sales as part of the FEMA-led Hurricane Katrina relief effort -- turned into this year's bad news, as Katrina-related spending fell off. Fleetwood's RV sales dropped by 7%, and its manufactured-housing sales plummeted 34%. Back out the FEMA business, however, and although manufactured-housing sales would still have fallen 24%, the RV business would have actually posted a slight increase, thanks to an 18% rise in the "folding trailer" segment.

Looking at the bigger picture, CEO Elden Smith noted that "industry trends seem to indicate an overall downturn for [the RV] market" and that "discounting has become more prevalent" among the major players. However, commenting on interest-rate and fuel-cost stabilization, he waxed optimistic that "prospects for the upcoming spring selling season will improve considerably."

What management does:
Investors who have been watching for signs that Fleetwood's rolling net margins would move firmly into the black soon (see the table below) should perhaps focus on Smith's "discounting" observation. If Fleetwood has to discount to match its rivals and to maintain market share, that's going to pressure gross margins, with cascading effects all the way down the income statement.

Margins %

4/05

7/05

10/05

1/06

4/06

7/06

Gross

16.6

16.0

15.8

16.7

17.4

16.9

Op.

(1.1)

(1.9)

(2.4)

(0.8)

1.5

1.0

Net

(6.8)

(8.4)

(8.9)

(6.3)

(1.2)

0.0

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:
According to Smith, Fleetwood is busily trying to implement "cost-saving measures . adjust production levels, and align capacity where needed to match expected demand going into our seasonally slower third quarter." Tomorrow, we'll want to check on how well the company is marrying actions to words, by examining (1) whether operating costs are falling at least as fast as revenues are declining, and (2) whether the company is selling down its inventories at a similar rate. So far, Fleetwood's record has been pretty good in this regard. Over the past six months, as sales declined 4%, it has slashed 19% from its selling, general, and administrative expenditures and has reduced inventory levels by a good 9%. Here's hoping tomorrow's news gives us more of the same.

Competitors:

  • Champion (NYSE:CHB)
  • Coachmen (NYSE:COA)
  • Berkshire Hathaway (NYSE:BRKa)
  • Monaco Coach (NYSE:MNC)
  • Thor (NYSE:THO)
  • Winnebago (NYSE:WGO)

For more Foolishness on Fleetwood and its peers, read:

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Fool contributorRich Smithdoes not own shares of any company named above.